The Philippines’ gross international reserves (GIR) dropped to their lowest level in 16 months in May, driven by the global downturn in gold prices and persistent outflows from foreign investments.

The nation’s stockpile of foreign currencies and liquid assets retreated to $104 billion at end-May, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Friday, June 5.

The central bank’s figure was the country’s thinnest cash buffer since January 2025, when reserves stood at $103.3 billion, and marked a steep decline from the historic high of $113.3 billion reached just three months earlier in February.

According to the BSP, the monthly decline was primarily driven by the national government’s payments for its foreign debt, downward valuation adjustments in gold holdings due to lower global prices, and the BSP’s net foreign exchange operations.

While foreign exchange holdings saw a slight recovery to $583 million in May from $469 million in April, they remain significantly lower than the $1.75 billion held in March.

Gold reserves continued to slide, falling to $19.5 billion from $19.8 billion in April and the record $23.1 billion seen in February. Similarly, foreign investments (foreign-denominated securities) decreased to $79.2 billion in May from $79.4 billion the previous month and $84.2 billion in February.

Despite the continued decline, the BSP maintained that the current reserve level remains a “robust external liquidity buffer.” It is sufficient to cover 6.9 months’ worth of imports of goods and payments for services and primary income, a level unchanged from April but down from the 7.5 months’ cover reported in February.

Furthermore, the BSP stated that the GIR as of May is enough to cover the country’s short-term external debt 3.6 times based on residual maturity. This further declined from the 3.8 times cover in April. 

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said that the decline in the reserves is not structural, but a valuation concern. Ravelas said gold prices have softened due to a rallying dollar, elevated global interest rates, and “some profit-taking after the earlier rally.”

“Naturally, that pulls down the mark-to-market value of our gold holdings,” Ravelas said, but he echoed the central bank’s assessment that the country’s US dollar stock remains “very comfortable and more than adequate.”

Ravelas said the Philippines’ reserves could return to the peak level seen in February, but at a gradual pace.

“We’ll need a favorable mix of lower global rates, a weaker dollar, and sustained inflows from remittances and exports,” Ravelas said, further noting that the current trend is merely a temporary decline, not a worsening state.

GIR is composed of the BSP’s reserve assets, including foreign-denominated securities (investments), gold, foreign exchange, special drawing rights (SDRs), and the country's reserve position in the International Monetary Fund (IMF).

These reserves serve as a critical buffer against external economic shocks, supporting the local currency and ensuring the country can meet its international obligations.