By Katherine K. Chan, Reporter

THE PHILIPPINES' dollar reserves fell to their lowest level in three years at end-September as the central bank drew down its holdings to support the peso, with foreign debt payments and weaker valuations of gold and foreign-currency assets adding further pressure.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the country's gross international reserves (GIR) declined to $99.997 billion in the nine months to September, down 8.31% from the $109.06 billion recorded a year earlier. The reading marked the lowest GIR level in three years, or since the $98.116 billion logged in September 2023. September was also the seventh straight month in which the reserves contracted on an annual basis. Month on month, the country's dollar reserves slid 4.62% from $104.846 billion.

In a statement issued late Wednesday, the central bank said its reserves shrank largely due to net foreign exchange operations, particularly as the peso depreciated further in September. The reescalation of the Middle East war, combined with domestic inflation woes and the US Federal Reserve's tightening, dragged the peso to six new record lows during the month. According to Bankers Association of the Philippines data, the currency sank to its weakest finish against the greenback at P62.86 on Sept. 14, before slumping to its worst intraday low of P62.925 on Sept. 15. As of end-September, the peso had fallen by P3.85, or 6.15%, from its P58.79 finish on Dec. 29, 2025.

The BSP deploys the country's foreign reserves by releasing US dollar liquidity when intervening in the foreign exchange market amid episodes of peso depreciation. In other words, the dollars released to steady the peso come straight out of the national stockpile, so a sustained defense of the currency shrinks the reserves even before valuation swings or government debt payments are counted.

The decline in the GIR was also attributed to “downward valuation adjustments, primarily driven by changes in the prices of the BSP's gold holdings and foreign currency-denominated reserve assets.” Reserves additionally fell after the National Government (NG) reduced its foreign currency deposits with the BSP to pay its external debts, with total withdrawals during the month exceeding deposits.

International reserves are the central bank's foreign assets, held mostly as investments in foreign-issued securities, foreign exchange, and monetary gold, among others. These are supplemented by claims on the International Monetary Fund (IMF) in the form of a reserve position in the fund and special drawing rights (SDRs). Because this is the pool of foreign currency a country can draw on to settle external obligations, the GIR reading is closely watched as a gauge of external liquidity.

“While exchange rate developments may have influenced reserve management operations, the decline in reserves cannot be attributed solely to peso weakness based on currently available data,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said via Viber. He noted that reserves also fell during the period because of downward valuation adjustments on gold prices and foreign currency reserve assets, as well as the National Government's foreign debt payments.

Composition of reserves

Foreign currency-denominated securities remained the largest component of the reserve portfolio, followed by gold. Preliminary BSP data showed gold holdings rose to $17.822 billion in the nine-month period, climbing 8.77% from $16.385 billion a year ago, although slipping 6.73% from $19.109 billion a month earlier. Foreign currency and deposits, meanwhile, plunged 37.81% to $3.083 billion as of September from $4.958 billion in the previous year, but doubled — a gain of 100.52% — from $1.538 billion at end-August.

The BSP's foreign currency-denominated securities declined 16.34% annually to $64.439 billion as of September from $77.028 billion, yet grew 0.62% month on month from $64.043 billion. The country's reserve position in the IMF dipped 1.98% year on year to $723.1 million from $737.7 million, and slipped 0.67% from $728 million a month prior.

SDRs — the amount the Philippines can tap from the IMF's reserve currency basket — fell 0.27% to $3.931 billion from $3.942 billion as of September 2025, and by 0.67% from $3.958 billion at end-August. Other reserves soared 66.36% to $9.998 billion at end-September from $6.01 billion in the same period last year, but slumped 35.37% from the $15.471 billion recorded in the prior month.

Adequacy intact

Despite falling below the $100-billion threshold, the latest level of dollar reserves remains ample to protect the country from market volatility and ensure it can pay its debts in the event of an economic downturn, according to the BSP.

“The latest GIR level provides sufficient foreign currency to meet the country's import needs, service its external debt obligations, and serve as a buffer against external economic shocks,” the central bank said.

Based on the latest data, the end-September reserves could cover about 3.2 times the country's short-term external debt based on residual maturity. They likewise translate to 6.3 months' worth of imports of goods and payments of services and primary income, exceeding the three-month standard widely used as a global benchmark for reserve adequacy.

SM Investments Corp. Group Economist Robert Dan J. Roces similarly observed that the end-September GIR level, while lower, still provides a good buffer although a weakening peso could bring pressure.

“The key point is that reserves are lower, but our buffer is not low,” he said in a Viber message. “The decline reflects lower gold valuations and the BSP's efforts to smooth out peso volatility.”

“We could see further pressure if the peso remains weak, but our reserves are still more than enough to cover several months of imports. So, this is more about managing volatility than worrying about our ability to meet external obligations,” he added.

For Mr. Asuncion, the trajectory of the Philippines' dollar reserves for the rest of the year will depend on “the balance between foreign exchange operations, external debt payments, valuation movements in reserve assets, and offsetting inflows from exports, remittances, investments, and official foreign borrowings.”

“Overall, while GIR has declined to its lowest level in three years, current reserve adequacy indicators suggest that the country's external position remains fundamentally sound,” he added.

The BSP projects its foreign reserves to decline to $104 billion this year from the $110.8 billion it held in 2025. Preliminary reserve figures are published monthly, so upcoming readings will show how the actual trajectory lines up with that projection — and whether the stockpile climbs back above the $100-billion mark.