By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES’ gross international reserves (GIR) rose to a record high at end-September, the Bangko Sentral ng Pilipinas (BSP) said on Monday. Â
Central bank data showed dollar reserves increased by 3.8% to $112 billion at the tip of September from $107.9 billion at the tip of August.
“The month-on-month increase within the GIR level reflected mainly the National Government’s (NG) net foreign currency deposits with the BSP, which include proceeds from the NG issuance of Republic of the Philippines global bonds,” the BSP said in an announcement.
In August, the NG raised $2.5 billion from its sale of triple-tranche US dollar-denominated global bonds. This was the federal government’s second global bond offering this 12 months.
Yr on 12 months, gross international reserves jumped by 14.2% from $98.1 billion.
BSP data showed the extent of dollar reserves was enough to cover about 6.3 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.
It was also corresponding to 8.1 months’ value of imports of products and payments of services and first income.
Ample foreign exchange buffers protect an economy from market volatility and be sure that a rustic pays its debts within the event of an economic downturn.
VALUATION OF GOLD RESERVES RISE
The central bank also attributed the rise in dollar reserves to “upward valuation adjustments within the BSP’s gold holdings resulting from the rise in the worth of gold within the international market, and net income from the BSP’s investments abroad.”
The central bank’s foreign investments went up by 2.4% to $94.5 billion as of September from $92.3 billion within the previous month. Yr on 12 months, foreign investments climbed by 13.9% from $83 billion.
Reserves in the shape of gold were valued at $10.9 billion as of end-September, up by 6.9% from $10.2 billion as of end-August. It was also higher by 11.2% from $9.8 billion a 12 months ago.
The BSP earlier defended its sale of gold holdings within the first half, saying that it took advantage of favorable prices as a part of its lively management strategy.
The sale of gold had “generated additional income without compromising the first objectives for holding gold, that are insurance and safety,” it added.
Data from the central bank showed foreign currency deposits soared by 157% to $2.03 billion in September from $789.5 million a month earlier. It likewise surged from $834.4 million within the previous 12 months.
Net international reserves increased to $112 billion at end-September from $107.8 billion at end-August, the BSP said.
Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, akin to short-term foreign debt and credit and loans from the International Monetary Fund (IMF).
The country’s reserve position within the IMF inched up by 0.7% to $731.1 million as of September from $725.9 million within the prior month but declined by 6% from $778.1 million a 12 months ago.
Special drawing rights — the quantity the country can tap from the IMF — was unchanged at $3.85 billion for the second straight month.
“It’s very possible the BSP proactively built up its GIR. If not for some healthy FX (foreign exchange) market intervention, the peso would have overshot (strengthened) too quickly,” Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said in a Viber message.
Rizal Business Banking Corp. Chief Economist Michael L. Ricafort said international reserves increased resulting from proceeds from the NG’s dollar bond issuance, in addition to continued growth in remittances, foreign tourism receipts, and foreign direct investments.
“The country’s strong external position would also support the country’s favorable credit rankings of 1 to a few notches above the minimum investment grade,” he added.
John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, likewise said this was mainly resulting from the surge in remittances.
“It’s that point of the 12 months again when remittances surge as the vacation season enters, the enrollment period is available in. Also, returns and dividends to foreign investments are being collected,” he said via Viber message.
“The sale of gold could have also contributed when the BSP did asset reclassification from gold to US dollars. In brief, there have been inflows recently,” he added.
Within the January-July period, money remittances went up by 2.9% 12 months on 12 months to $19.332 billion.
Mr. Neri noted that the beginning of the US Federal Reserve’s easing cycle also supported the GIR.
“The space to construct import cover and debt coverage often opens up at any time when the Federal Reserve pivots to policy easing,” he said.
The US central bank reduced its benchmark policy rate by 50 basis points (bps) to the 4.75%-5% range in September, its first rate cut in 4 years.
“The import cover is greater than double the international standard of 3-4 months that might proceed to offer buffer support for the peso exchange rate,” Mr. Ricafort added.
Mr. Neri said the present $112-billion GIR level is just around $20 billion lower than the country’s external debt.
Outstanding external debt hit a record $130.182 billion at the tip of June, separate data from the BSP showed.
“With more US rate cuts expected, the BSP can accumulate further so long as it doesn’t cut the reverse repurchase rate rather more aggressively than the Fed,” Mr. Neri added.
BSP chief Eli M. Remolona, Jr. has said the Monetary Board can possibly deliver 25-bp rate cuts at its remaining two meetings this 12 months on Oct. 16 and Dec. 19.
The BSP expects the country’s GIR to hit $106 billion by end-2024.
