Forex reserves rise to $81.5 B in August

MANILA, Philippines — The country’s foreign exchange buffer improved to a three-month high of $81.51 billion in August, $447.9 million higher than the revised $81.06 billion recorded in July, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo reported yesterday.

The latest gross international reserves level was the highest since hitting $82.18 billion in May.

Guinigundo said the build-up in reserves was due mainly to inflows arising from the revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market.

Data showed the BSP’s gold holdings went up 5.3 percent to $8.43 billion in August from $8 billion in July.

Guinigundo also cited the national government’s net foreign currency deposits as well as the central bank’s earnings from its investments abroad.

However, he explained the increase was offset by the payments made by the national government for its maturing foreign exchange obligations and the foreign exchange operations of the central bank.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure that 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.

Guinigundo said the end-August GIR level could cover 8.7 months’ worth of imports of goods and payments of services and income and is also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.

The Central bank lowered the 2017 GIR target to $80.5 billion, equivalent to 8.2 months import cover instead of $84.7 billion equivalent to 8.8 months import cover.