October dollar reserves inch up

By Luz Wendy T. Noble, Reporter

The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s gold holdings rose.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed gross international reserves (GIR) went up by 1.3% to $107.946 billion as of end-October from $106.596 billion as of end-September.

It also jumped 4% from the $103.802 billion a year earlier.

“The month-on-month increase in the GIR level reflected mainly the National Government’s net foreign currency deposits with the BSP and upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market,” the central bank said in a statement.

The end-October GIR level is enough to cover 7.8 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

It is also equivalent to 10.8 months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

The end-October GIR’s increase may have reflected the proceeds from the government’s retail dollar bonds (RDBs), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The two-week offering of the first-ever RDBs ended on Oct. 1. The government raised $1.593 billion (P80.91 billion) from the bond offering, which was sought to support the country’s widening budget deficit amid the pandemic.

GIR in the form of foreign investments jumped 1.74% to $91.272 billion as of end-October from $89.704 billion a month earlier and by 4.4% to $87.415 billion a year ago.

The BSP’s gold reserves was valued at $9.13 billion, 3.2% higher than the $8.848 billion as of end-September, but 21% lower than the $11.65 billion as of end-October 2020.

The Philippines’ reserve position in the International Monetary Fund (IMF) also inched up 0.13% to $787.3 million as of end-October from 786.2 million a month ago, but lower by 1.36% than the $798.2 million in the same period last year.

Meanwhile, the country’s special drawing rights — or the amount the country can tap from the IMF – was unchanged at $3.965 billion for the second straight month but more than three times bigger than the $1.206 billion a year earlier.

On the other hand, buffers in the form of foreign currency deposits fell 15% month on month to $2.792 billion from $3.292 billion, although it went up 2.23% from the $2.731 billion as of end-October 2020.

The ample level of GIR will be a safeguard in cases of currency volatility, ING Bank-NV Manila Senior Economist Nicholas Antonio T. Mapa said.

“Concerns about the sharp drawdown of GIR remain but so far the central bank has helped maintain a relatively stable currency as the peso moves along based on its current macroeconomic fundamentals,” he said in an email.

The peso has weakened versus the greenback over the past few months as imports have gradually recovered and with oil prices inching higher. However, the peso is expected to get stronger due to remittance inflows ahead of the holiday season.

At its close of P50.165 per dollar on Thursday, the peso has retreated by 4.46% from its P48.02 finish on Dec. 29, 2020.

Companies’ fund-raising activities as well as seasonal remittance uptick are expected to lift the country’s GIR in the last few months of 2021, Mr. Ricafort said.

The dollar buffers are expected to reach $117 billion by end-2021 before decreasing to $115 billion by end-2022, based on BSP projections.