Foreign reserves climb to $104.5 billion in November

MANILA, Philippines — Foreign reserves continued to balloon in November hitting a new all-time high, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

Gross international reserves amounted to $104.5 billion as of last month, up by 0.68% from previous month’s level of 103.80 billion. Since end last year, reserves have soared 19% to date.

Reserves, considered as buffer funds against external shocks, were sufficient to cover 11.2 months’ worth of imports of goods and services, nearly double the global standard of adequacy pegged at 6 months. 

The pile was also equivalent to 9.3 times the country’s short-term external debt based on residual maturity.

Last week, BSP revised its projection for reserves upwards to $105 billion by yearend, cementing expectations that the Philippines’ main sources of dollars, while declining this year, would not suffer as much from pandemic disruptions on business and economic activities. 

Indeed, remittances are projected to go down 2% year-on-year in 2020, much moderated than the original 5%, while earnings from business process outsourcing sector would inch down a slower 1%. As it is, cash remittances are already outperforming the forecast, only down 0.9% as of October.

But rising reserves, while giving Philippines economic protection, also signals that the broader economy would remain subdued for the time being. Imports had been down for 18 consecutive months, signaling consumer supplies are outstripping tepid demand and leaving traders with no reason to ship in goods and pay up in dollars. 

In October, BSP said reserves benefited from earnings generated by its foreign investments, as well as “foreign exchange operations,” which basically is the central bank’s buying and selling of dollars in the foreign exchange market to manage the peso’s rise and fall.

“These inflows were partly offset, however, by the foreign currency withdrawals the National Government made to pay its foreign currency debt obligations and revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market,” the BSP said. 

Foreign exchange composed of the most-traded currencies such as Japanese yen, US dollar and the euro, gold, investments of the BSP overseas, and contributions to the International Monetary Fund.