Foreign reserves breach $100-billion milestone in September
MANILA, Philippines — Foreign reserves broke the $100-billion mark last month, rising to historic levels and putting the economy in good hands in facing a lingering pandemic.
At $100.5 billion as of September, gross international reserves (GIR) were sufficient to cover 10 months worth of imports, the highest since June 2015's 10.1 months, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.
The latest import cover— a gauge of adequacy—has fallen well above the globally minimum accepted 6 months. Apart from imports, reserves were also equivalent to 5.4 times the country’s short-term external debt due within 12 months based on residual maturity.
The current healthy reserve level suggests that the Philippines would remain afloat even under extreme but highly unlikely scenario of a dry-up in dollar resources. Reserves technically serve as buffer funds for the economy during external shocks, but their use is highly limited and regulated by the BSP.
Since September last year, when a slight decline was recorded, GIR have persistently increased, a phenomenon that only accelerated when the pandemic struck last March.
That reserves are increasing should come as no surprise since as it is, the central bank expects dollar resources to hit a larger surplus this year mainly because of tepid imports. The balance of payments— which summarizes all inflows and outflows in an economy— is seen registering $8.1 billion in surplus this year, up more than eight-fold from $600 million projected last May.
“The month-on-month increase in the GIR level reflected inflows mainly from the BSP’s foreign exchange operations and National Government’s foreign currency deposits with the BSP,” the central bank said.
“These inflows were partly offset, however, by the revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market and foreign currency withdrawals made by the National Government to pay its foreign currency debt obligations,” it added.
Reserves are composed of gold, investments and cash in the form of various currencies most commonly traded like the US dollar, euro, pound, yen and the yuan. In end-September, the largest month-on-month increase was recorded by foreign investments, up 2.5% to $84.41 billion. Investments accounted for the bulk of GIR.
Meanwhile, the value of gold holdings declined 3.7% from August to $11.6 billion due to lower prices. Foreign currencies kept also dipped slightly to $2.53 billion, as well as funds invested with the International Monetary Fund (IMF) at $747.9 million.
The balance of $1.21 billion, steady from previous month, was in the form of special drawing rights, considered the IMF’s official currency unit.
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