The Philippines' foreign reserves have dropped to their lowest level in seven months, driven by global market instability linked to the U.S.-Iran conflict, which has impacted the central bank's overseas investments and reduced the value of its gold holdings.
Data released by the Bangko Sentral ng Pilipinas (BSP) shows that gross international reserves (GIR) stood at $107.5 billion at the end of March, marking the weakest performance since August 2025. These reserves are crucial for the country's economic stability, serving as a buffer against external shocks by financing imports and foreign debt payments during periods of reduced export earnings or limited access to foreign loans.
The reserve stockpile is composed primarily of A-rated foreign investments held by the central bank, along with gold, foreign exchange, and the country's reserve position and borrowing arrangements with the International Monetary Fund.
At this rate, the reserve level is falling short of the central bank's year-end target of $111 billion. A detailed analysis of the report reveals that the central bank's offshore investments, which make up the majority of the reserves, have declined to $80.9 billion—the lowest in over two years.
The downturn is attributed to the Gulf region conflict that erupted in late February, which unsettled global markets and prompted a shift toward safe-haven assets. This turmoil also triggered an oil-price shock, fueling inflation concerns and expectations of higher interest rates.
Compounding the pressure, the value of the central bank's gold holdings decreased from a record high to a three-month low of $20.2 billion. Gold, often seen as a haven and inflation hedge, tends to lose its appeal when interest rates rise, as it does not generate yields like bonds.
Special drawing rights with the IMF remained steady at $4 billion, while the country's contribution to the institution dropped by 1.7 percent month-on-month to $714 million. In contrast, the central bank's foreign exchange holdings increased to $1.8 billion, reaching their highest level in 17 months.
Overall, the current GIR level is equivalent to 7.1 months' worth of imports of goods and payments for services and primary income. It also provides nearly four times the coverage for the country's short-term external debt based on residual maturity. GIR is considered adequate if it can finance at least three months of imports and cover at least 100 percent of the country's short-term external debt.