By Katherine K. Chan, Reporter

The Philippines' gross international reserves (GIR) fell to their lowest level in 18 months during July, as the Bangko Sentral ng Pilipinas (BSP) deployed dollars to defend the peso amid renewed market turbulence.

Preliminary central bank data released on Friday showed the country's GIR at $103.379 billion as of end-July — a level the regulator described as remaining "adequate." The figure represented a 1.3% decline from $104.745 billion at the end of June and a 1.93% drop from $105.418 billion a year earlier.

It was the lowest reserves reading since January 2025, when the GIR stood at $103.271 billion, and marked the fifth consecutive month of year-on-year decline.

In a Friday statement, the BSP attributed the contraction primarily to its net foreign exchange operations, undertaken as a strengthening dollar pressured the peso once again. Renewed conflict in the Middle East during July rattled markets and drove safe-haven demand for the greenback, pushing the peso to a new record low of P61.847 per dollar on July 24, surpassing the previous record of P61.75 set the day before.

BSP data showed the local currency averaged P61.5963 against the dollar in July, holding above the P61 level for a third straight month.

The central bank also cited withdrawals by the national government from its foreign currency accounts held at the BSP to service external debt obligations. Total withdrawals outpaced deposits during the month, further reducing reserves.

Partially offsetting the decline were higher valuations of the BSP's gold holdings amid elevated global gold prices, along with net income from the central bank's foreign investments.

Gross international reserves comprise the central bank's foreign assets — primarily investments in foreign-issued securities, foreign exchange, and monetary gold — supplemented by the country's reserve position in the International Monetary Fund (IMF) and special drawing rights (SDRs).

As of end-July, the BSP's gold holdings stood at $17.49 billion, up 1.72% from $17.194 billion a month earlier and 26.89% higher than $13.783 billion a year ago. Its reserve position in the IMF edged up 0.08% to $725.2 million from $724.6 million at end-June, though it declined 0.52% year on year from $729 million.

SDRs — the amount the Philippines can draw from the IMF's reserve currency basket — rose 0.56% to $3.937 billion from $3.915 billion at end-June, and gained 1.22% from $3.89 billion a year earlier.

The BSP's foreign currency and deposits, however, fell 19.16% month-on-month to $1.849 billion from $2.287 billion, and plummeted 75.4% year on year from $7.516 billion. Holdings of securities declined 6.63% to $67.264 billion from $72.037 billion the prior month and 7.81% from $72.958 billion in the same period last year.

Other reserve assets surged 41.08% to $12.115 billion from $8.587 billion at end-June, nearly double the $6.542 billion recorded a year ago.

The central bank noted that end-July reserves could cover approximately 3.6 times the country's short-term external debt based on residual maturity. The GIR also equates to 6.7 months of imports of goods and payments of services and primary income, well above the international benchmark of three months.

"These provide 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 BSP said.

The Philippines is not alone in drawing down reserves to stabilize its currency. Central banks across emerging markets have faced similar pressures as a robust dollar and shifting U.S. monetary policy expectations have triggered capital outflows and currency depreciation throughout 2025. For a net-importing economy such as the Philippines, sustained peso weakness can raise the cost of key imports including fuel and food, complicating the inflation outlook even as the BSP works to bring price growth within target.

The central bank projects foreign reserves to decline to $104 billion by end-2026, down from the $110.8 billion held at the end of last year.