Forex reserves build up to 2-year high

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) continued to build up the country’s foreign exchange buffer as the gross international reserves (GIR) level increased for the fourth straight month to hit its highest level in more than two years.

Newly installed BSP Govenor Benjamin Diokno said the GIR level settled at $82.89 billion in February, higher than the revised $82.49 billion in January due to the strong inflows of foreign exchange into the country.

This was also the highest GIR level in 27 months or since hitting $85.11 billion in October 2016. 

“This rise in the GIR level was due mainly to inflows arising from the BSP’s foreign exchange operations, net foreign currency deposits by the national government, and the BSP’s income from its investments abroad,” Diokno said.

Data showed the central bank’s foreign investments inched up to $70.44 billion last month from $69.97 billion in January.

However, Diokno said the increase in reserves was partially tempered by payments made by the national government for servicing its foreign exchange obligations as well as revaluation losses from the central bank’s gold holdings, resulting from the decrease in the price of gold in the international market.

The BSP’s gold holdings also amounted to $8.36 billion in end-February, slightly lower than the $8.41 billion recorded in January.

The GIR is the sum of all foreign exchange flowing into the country. It serves 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.

The central bank has been building up the country’s forex buffer since November last year. It uses the buffer to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso against the dollar.

Last year, the BSP allowed the moderate and gradual depreciation of the peso against the dollar as part of its mandate to smoothen the volatility in the foreign exchange market and to support the expanding economy.

The peso ended the third weakest currency in the region after the Indian rupee and Indonesian rupiah last year. It lost 5.3 percent to close 2018 at 52.58 to $1 from end-2017 level of 49.94 to $1.

Diokno said the GIR is equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 6.3 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

“The end-February 2019 level of GIR serves as an ample external liquidity buffer,” the BSP chief said.