Forex reserves rise to record $103.8 billion

MANILA, Philippines — The country’s foreign exchange buffer reached a record $103.81 billion in end-October, helping soften the blow of the COVID-19 pandemic on the domestic economy, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno said the $3.37-billion increase in the gross international reserves (GIR) in October from the September level of $100.44 billion reflected inflows mainly from the central bank’s foreign exchange operations as well as the national government’s foreign currency deposits with the BSP, and higher valuation of its gold holdings.

Diokno said the strong inflows were partly offset by the foreign currency withdrawals made by the national government to pay its foreign obligations amounting to $234 million.

“The end-October 2020 GIR level represents a more than adequate external liquidity buffer,” he said.

According to the BSP, the buffer is equivalent to 10.3 months’ worth of imports of goods and payments of services and primary income as well as 9.3 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

The GIR is the sum of all foreign exchange flowing into the country and serves as buffer to ensure that it will not run out of foreign exchange that it could use in case of external shocks.

Like most central banks, it holds international reserves to provide a standby supply of foreign exchange for instances when foreign exchange holdings of domestic commercial banks temporarily fall short of the total demand from the private sector and the national government.