Foreign reserves sufficiency hits 4-year peak
MANILA, Philippines — Foreign reserves were a tad away from the $100-billion milestone last month, rising not only in value but also in sufficiency to cover the economy’s needs that now runs at the highest level in 4 years.
According to central bank data released Wednesday, gross international reserves rose by $350 million from previous month to hit $98.95 billion, a fresh all-time high. In July, reserves were at $98.6 billion.
At that level, buffer funds were sufficient to cover 9 months’ worth of imports, a level not seen since November 2016. The so-called “import cover” is one gauge to measure whether reserves are enough to sustain the economy’s operations in hard times.
Reserve funds are theoretically maintained at a level equivalent to at least 6 months of import cover.
Apart from imports, reserves are kept supposedly to meet foreign debts and other obligations. As of August, buffer funds were equivalent to 4.6 times foreign debts falling due within a year based on residual maturity.
Netting the value of short-term debts out, reserves still rose by $354 million to $98.95 billion month-on-month.
Last month, the Bangko Sentral ng Pilipinas (BSP) said reserves got a boost from its own investment earnings abroad. Foreign investments account for the largest share of reserves, amounting to $82.45 billion as of August.
BSP also pointed to its “foreign exchange operations” as reason for the uptick. This typically pertains to how the central bank manages the peso’s movement by buying or selling currencies. Last month, currencies in reserves reached $2.51 billion.
These inflows, in turn, were offset by the payments made to foreign debts and losses from BSP’s gold reserves, which saw a decrease in prices in the global market. Gold holdings amounted to $12.03 billion as of August, figures showed.
The rest of reserves were invested in the International Monetary Fund at $753.7 million, or in the form of special drawing rights, IMF’s own currency, which last month reached $1.2 billion.
The increasing dollar reserves supports the Philippines’ investment-grade rating, which in turn, allow the government and private entities to borrow at low costs.
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