Forex reserves hit record high $87.9 billion

MANILA, Philippines — The country’s foreign exchange buffer reached a record high $87.86 billion in 2019, 10.9 percent higher than the $79.19 billion recorded in 2018 due to strong foreign exchange inflow, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said during the meeting of the Tuesday Club at EDSA Shangri-La Hotel in Mandaluyong that the central bank has been building up the country’s gross international reserves (GIR) since last year.

“We have steadily built up our GIR, providing an abundant buffer to meet foreign exchange demands and our liquidity requirements,” Diokno said.

The actual GIR level was higher than the revised target of $85 billion set by the BSP for 2019. The buffer in December was also $1.63 billion higher than the end-November level of $86.23 billion.

The GIR is the sum of all foreign exchange flowing into the country. It serves as buffer to ensure that the country does not run out of foreign exchange to pay for imported goods and services, or maturing obligations in case of external shocks.

The BSP has been building up the country’s foreign exchange buffer to help the country survive external shocks. It uses the buffer to buy or sell dollars if necessary to prevent any sharp depreciation or appreciation of the peso.

Diokno said the month-on-month increase in the GIR level reflects the inflows arising from the BSP’s foreign exchange operations and income from its investments abroad as well as the national government’s net foreign currency deposits.

The inflows, he explained, were offset partly by outflows representing payments made by the national government on its foreign exchange obligations.

The BSP chief said the buffer is equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.

The GIR level, he added, is also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4.3 times based on residual maturity.

For 2020, the central bank sees the GIR level rising further to $86 billio enough to cover 6.8 months’ worth of imports.

Strong inflows continued to beef up the GIR from sustained remittances, robust receipts from business process outsourcing and tourism as well as steady foreign investment inflows.