FOREIGN debt payments, lower gold prices and the need to defend the peso led to a drop in the country's gross international reserves (GIR) last month, the Bangko Sentral ng Pilipinas (BSP) reported late Friday.

At $104.70 billion, GIR was $314.7 million lower than May's $105.02 billion — a rebound the central bank last month attributed to foreign currency deposits by the government.

Last month's decline, the BSP said in a statement, was due to the government having paid off some of its foreign debt and a decrease in the value of the central bank's gold holdings due to lower prices of the precious metal.

BSP Governor Eli Remolona Jr. said that some of the reserves was used to defend the peso, which has been trading in the P58:$1 level since late May after the central bank signaled that it could start cutting interest rates ahead of the US Federal Reserve.

"It's not all of it, but some of it," he told reporters on Friday. "As I said before, we don't want the peso to depreciate very sharply."

The central bank chief, who has said that the country's GIR is enough to defend the peso, said that they were not looking to peg it at a certain level but were only moving to prevent a sharp depreciation.

The currency strengthened by five centavos to P58.53 against the dollar on Friday, its best close in nearly a month.

"The latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.7 months' worth of imports of goods and payments of services and primary income," the central bank said.

It is also about 6.1 times the country's short-term external debt based on original maturity and 3.8 times based on residual maturity, it added.

The GIR level is considered adequate if "it can finance at least three months' worth of the country's imports of goods and payments of services and primary income," the BSP explained.

The level is also considered adequate "if it provides at least 100 percent cover for the payment of the country's foreign liabilities, public and private, falling due within the immediate twelve-month period."

Net international reserves, which comprise the difference between GIR and reserve liabilities, declined by $290 million to $104.69 billion as of end-June from May's $104.98 billion.

GIR consists of the BSP's foreign investments, gold, foreign exchange, a reserve position in the International Monetary Fund, and special drawing rights.

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