The Philippines’ balance of payments (BOP) swung to a $298-million deficit in May, a reversal from the billion-dollar surplus a year ago, as the government drew down its dollar reserves to pay foreign debts.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s BOP, which reflects its international transactions, reversed the $2-billion surplus recorded in May last year.

According to the BSP’s statement released on Friday, June 20, “the BOP deficit reflected the national government’s drawdowns on its foreign currency deposits with the BSP to service external debt obligations.”

As such, the $1.6-billion surplus recorded in the first five months of 2024 shifted to a $5.8-billion deficit in the January-to-May period this year.

“Preliminary data indicate that the year-to-date BOP deficit was largely due to the continued trade in goods deficit,” the BSP reported.

According to the Philippine Statistics Authority (PSA), the trade deficit for the first four months of the year narrowed slightly to $15.9 billion, down from $16 billion a year earlier.

However, the BSP noted this “decline was partly muted by the sustained net inflows from personal remittances from overseas Filipinos, foreign borrowings by the national government, and foreign portfolio investments (FPI).”

As per the central bank, the BOP trend followed a slight drop in the country’s gross international reserves (GIR) or United States (US) dollar stock, which slipped from $105.3 billion at the end of April to $105.2 billion by the end of May.

Still, the GIR level “remains a strong external liquidity buffer, sufficient to cover 7.1 months' worth of imports of goods and payments of services and primary income,” the BSP said.

The latest GIR level ensures the country has enough foreign currency to cover its BOP needs, such as paying for imports or servicing debts, even in worst-case scenarios when export earnings or foreign loans dry up.

It also covers about 3.3 times the country’s short-term foreign debt based on residual maturity.

Short-term debt based on residual maturity includes all foreign debt originally due in one year or less, along with upcoming principal payments on medium-term and long-term loans from both the public and private sectors that are set to mature within the next 12 months.