Philippine dollar reserves up in January — BSP

MANILA, Philippines — The Philippines’ dollar reserves opened 2023 in the green, receiving a much-needed lift from the national government’s foreign currency deposits within the Bangko Sentral ng Pilipinas.

Data released by the BSP on Tuesday showed the country’s gross international reserves inched up 3.75% month-on-month to $99.7 billion in January.

The central bank attributed the gains to the national government’s various investment and financing activities.

“The month-on-month increase in the GIR level reflected mainly the National Government’s net foreign currency deposits with the BSP, which include proceeds from its issuance of ROP Global Bonds, the upward valuation adjustments in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market, and net income from the BSP’s investments abroad,” the statement read.

Foreign reserves are assets held mostly as investments in foreign-issued securities, gold as well as foreign currencies like dollar and euro. Being the lender of last resort, the BSP manages reserves as a stand-by fund to help the economy stay afloat in times of external shocks.

The Marcos Jr. administration has tapped the international credit market twice since the start of its term. Bonds were put up for sale, one in October 2022 and in January, to bankroll the government’s budget needs.

That said, the country’s dollar reserves could find pockets of growth in 2023 amid the projected global economic recession. Domini Velasquez, chief economist at China Banking Corp., thinks so.

“As the USDPHP came off its highs from 2022, the BSP may find this as an opportune time to build up its foreign reserves to ensure that it would have ample ammunition against volatilities in the FX market,” she said in a Viber message.

The BP noted that the latest GIR level represented an external liquidity buffer equivalent to 7.5 months’ worth of imports of goods, income and payments of services.

The reserves are 6 times the country’s short-term external debt based on original maturity and 4 times based on residual maturity.

“We think it is going to be a weaker US dollar this year and there will be less need to defend the peso,” Velasquez added.