For the third straight month, the country’s US dollar reserves declined to $98.689 billion as of end-September this year from $99.567 billion end-August after the government paid for its maturing foreign debt.

Based on Bangko Sentral ng Pilipinas (BSP) data, the end-September gross international reserves (GIR) are higher compared to $93 billion same period in 2022. At the time, the BSP was unloading a significant amount of US dollars to defend the peso vis-à-vis the strong greenback. By end-December last year, the central bank has spent $15 billion of the GIR to prevent the rapidly depreciating peso from breaking past P60.

The BSP said over the weekend that at $98.689 billion, the latest GIR level is still considered “more than adequate external liquidity buffer”. The last time the GIR was at the $98-billion level was in February this year. It reached a high of $101.760 billion in April before falling below $100 billion by June.

The current GIR is equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income. It is also about 5.7 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity. 

According to the BSP, “the month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) payments of its foreign currency debt obligations and the downward adjustments in the value of Bangko Sentral ng Pilipinas’ (BSP) gold holdings due to the decrease in the price of gold in the international market.”

A GIR is adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income. It is also viewed as more than sufficient if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period.

The BSP’s reserve assets are composed of gold, foreign investments, foreign exchange, reserve position in the International Monetary Fund (IMF), and special drawing rights or SDRs in the IMF.

As of end-September, the BSP’s gold reserves amounted $9.879 billion versus $10.231 billion in the previous month. In the same period last year, the gold stock was at $8.334 billion.

BSP’s foreign investments mainly in securities and bonds totaled $83.526 billion compared to $84.113 billion end-August and $78.708 billion same time in 2022.

Meanwhile, the amount of foreign exchange held by BSP amounted to $827.4 million from $644.6 million previously. Last year, it was $1.637 billion in foreign exchange reserves.

The BSP’s reserve position in the IMF totaled $778.1 million while SDR holdings was at $3.608 billion.

At the end of 2022, the country’s foreign reserves totaled $96.149 billion, lower than $108.794 billion in 2021. The end-2021 GIR is the highest on record, so far.

For 2023, the BSP expects GIR to settle at $100 billion.

BSP Governor Eli M. Remolona Jr. has often said that he is confident the country has enough foreign reserves to buck global shocks or spillovers and even a US recession.

“It's a good thing that we have ample reserves,” he said, adding that the GIR is “ample in the face of what we hope will not be so bad.” He is referring to global growth challenges this year and in 2024 amid high interest rates and inflation.

Remolona reiterated that the Philippines have adequate reserves which, despite foreign exchange interventions, are still intact. “At this stage, we’re not really using them, but we have these buffers in case needed,” he said previously.

Source:
courtesy of MANILA BULLETIN

by LEE C. CHIPONGIAN

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