Surpass $82.7-B target FOR 2016 Forex reserves hit 2-year high

MANILA, Philippines - The country’s foreign exchange reserves continued to increase, hitting the highest level in more than two years and exceeding the full-year target amid strong inflows, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Deputy Governor and officer-in-charge Vicente Aquino said gross international reserves (GIR) reached $83.47 billion in April, $489.5 million higher compared with the revised $82.98 billion in March.

Last month’s foreign exchange reserve level was the highest since reaching $83.18 billion in December 2013. The reserves also exceeded the full-year target of $82.7 billion set by the BSP.

Aquino traced the increase to the revaluation gains on the BSP’s gold holdings resulting from the increase in the price of gold in the international market and its income from investments abroad.

Data showed the value of BSP’s gold holdings went up five percent to $8.15 billion in April from $7.76 billion in March, while income from investments abroad inched up slightly to $71.57 billion from $71.38 billion.

He also cited the net foreign currency deposits by the national government.

Aquino explained the increase was partially offset by payments made by the national government for its maturing foreign exchange obligations.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.

If it deems necessary, the BSP buys dollars from the foreign exchange market to prevent sharp depreciation of the peso. It can also sell to avoid sharp appreciation of the local currency.

Aquino said the end-April GIR level remains ample as it can cover 10.4 months’ worth of imports of goods and payments of services and income.

He added the GIR level was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

The country’s foreign exchange reserves reached $80.67 billion last year from $79.54 billion in 2014. The figure was slightly lower than the revised GIR level target of $80.7 billion for 2015.

For this year, the BSP sees the GIR hitting $82.7 billion equivalent to nine months import cover.

The BSP now expects cash remittances from Filipinos abroad growing by four percent this year. It also expects the current account surplus of $5.7 billion this year, lower than the projected level of $8.9 billion in 2015 due mainly to the expected large increase in the imports of goods, notwithstanding improvements in the services and secondary income accounts.