Forex reserves rise to $87.6 billion in February

MANILA, Philippines — The country’s foreign exchange buffer increased to $87.61 billion in February from $86.87 billion in January reflecting inflows arising from the government’s net foreign currency deposits and the net foreign exchange operations of the Bangko Sentral ng Pilipinas.

The inflows, the BSP said, were partly offset by payments made by the national government for servicing its foreign currency debt obligations.

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 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 it deems necessary to prevent sharp depreciation or appreciation of the peso.

The country’s foreign exchange reserves hit an all-time high of $87.84 billion in December last year due to strong inflows from overseas Filipino workers,  tourism receipts, earnings of the business process outsourcing sector, among others.

The BSP said the GIR in February could cover 7.7 months’ worth of imports of goods and payments of services and primary income.

The buffer, according to the central bank, is also equivalent to 5.4 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

For this year, the BSP set a GIR target of $86 billion, enough to cover 6.8 months’ worth of imports.

BSP Governor Benjamin Diokno said the sustained build up of the country’s foreign exchange reserves continued to lend strong support for the stability of the peso.

Diokno pointed out the current movement of the peso reflects a confluence of factors from both the external and domestic environment.

Under a market-determined exchange rate, the value of the peso to move along with the demand for and supply of foreign exchange in the economy.

The BSP chief said authorities would continue to assess the impact of the COVID-19 outbreak on the country’s external payments position.