Forex reserves highest in 22 months

MANILA, Philippines - The country’s foreign exchange reserves rose for the second straight month in October, hitting its highest level since December 2013, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said the country’s gross international reserves (GIR) reached $81.14 billion in end October, $59 million higher compared to $80.55 billion in end September.

This was the highest level since December 2013 when the country’s foreign exchange reserves hit $83.18 billion. It is also near the full-year GIR target of $81.6 billion set by the central bank.

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.

Tetangco traced the slight uptick in GIR last month to the national government’s net foreign currency deposits, revaluation adjustments on the central bank’s gold holdings as well as its income from investments abroad.

The value of the BSP’s gold holdings grew 2.3 percent to $7.18 billion in October from $7.01 billion in September, while its overseas investments inched up by close to one percent to $71.44 billion from $70.79 billion.

He explained the foreign exchange inflows were partially offset by payments made by the national government for its maturing foreign exchange obligations.

The BSP chief said the end October 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 6.1 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.

The BSP expects the Philippines to end the year with about $81.6 billion in dollar reserves. It also sees the country’s balance-of-payments (BOP) position to post a surplus of about $2 billion, a reversal of the $2.9 billion deficit booked last year.

The country’s strong macroeconomic fundamentals would help the Philippines survive external shocks brought about by uncertainties caused by the impending interest rate hike by the US Federal Reserve as well as the economic slowdown in China.

Tetangco earlier said the central bank is finalizing revisions of the BOP position data particularly on trade as well as portfolio investments.