By Luisa Maria Jacinta C. Jocson, A reporter
PHILIPPINES’s gross international reserves (GIR) increased a record high at the end of September, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
Central bank data showed that dollar reserves rose by 3.8% to $112 billion at the end of September from $107.9 billion at the end of August.
“The monthly increase in GIR level refthe most designated is the National Government’s (NG) foreign exchange surplus with the BSP, which includes the proceeds from the NG’s issuance of the Republic of the Philippines’ international bonds,” the BSP said in a statement.
In August, NG raised 2.5 billion dollars from its sale of international bonds denominated in US dollars three times. This was the government’s second global commitmentfthis year.
Year-over-year, international reserves jumped 14.2% from $98.1 billion.
BSP data showed the level of dollar reserves is enough to cover about 6.3 times the country’s short-term external debt based on actual maturity and 4.4 times based on net maturity.
It also equated to 8.1 months worth of imports and the payment of services and basic income.
Adequate foreign exchange bufwindows protect the economy from market volatility and ensure that the country can pay its debts in the event of an economic collapse.
PROMOTION OF GOLDEN POEMS IS GROWING
The central bank also attributed the increase in dollar reserves to “increasing changes in the value of BSP’s gold assets due to the increase in gold prices in international markets, as well as net income from BSP’s investments abroad.”
The central bank’s foreign investment rose 2.4% to $94.5 billion as of September from $92.3 billion the previous month. Year-on-year, foreign investment increased by 13.9% from $83 billion.
Gold reserves stood at $10.9 billion as of the end of September, up 6.9% from $10.2 billion as of the end of August. It was also up 11.2% from $9.8 billion last year.
The BSP has previously defended its sale of gold properties fthe first part, it says it used favorable prices as part of its effective management strategy.
Gold sales “bring in additional income without compromising the primary purposes of holding gold, which are insurance and safety,” it added.
Data from the central bank showed that foreign deposits increased by 157% to $2.03 billion in September from $789.5 million in the previous month. It was also up from $834.4 million last year.
Total international reserves rose to $112 billion at the end of September from $107.8 billion at the end of August, the BSP said.
Net international reserves are difThe agreement between the BSP’s or GIR’s reserve assets and reserved liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).
The country’s reserve position at the IMF grew by 0.7% to $731.1 million as of September from $725.9 million the previous month but fell 6% from $778.1 million a year ago.
Special drawing rights – the amount a country can get from the IMF – was unchanged at $3.85 billion for the second month in a row.
“It is possible that BSP is building its own GIR. If not for the intervention of a healthy FX (foreign exchange) market, the peso will be over (strengthened) quickly,” Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said in a message of Viber.
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said international reserves have increased due to the NG dollar bond issuance proceeds, as well as continued growth in remittances, foreign tourism receipts, and foreign direct investment.
“The country’s strong external environment will also support the country’s favorable credit ratings of one to three notches above the minimum investment grade,” he added.
John Paolo R. Rivera, a senior researcher at the Philippine Institute for Development Studies, also said this is due to the increase in remittances.
“It’s that time of the year and when remittances go up as the holiday season approaches, enrollment season kicks in. Also, the returns and benefits on foreign investment are piling up,” he said via Viber message.
“Gold sales are likely to be affected when the BSP reallocates assets from gold to US dollars. In short, money has come in recently,” he added.
In the January-July period, remittances increased by 2.9% year-on-year to $19.332 billion.
Mr. Neri noted that the beginning of the US Federal Reserve’s the easing cycle also supported the GIR.
“The space to build import insurance and credit coverage tends to open up whenever the Federal Reserve focuses on easing policy,” he said.
The US central bank cut its benchmark policy rate by 50 basis points (bps) to a 4.75%-5% range in September, its first rate cut in four years.
“The import cover is more than double the international level for 3-4 months which will continue to provide bufgreat support for the peso exchange rate,” added Mr. Ricafort.
Mr. Neri said the current level of GIR of 112 billion is 20 billion dollars less than the country’s foreign debt.
The outstanding foreign debt reached a record 130.182 billion dollars at the end of June, separate data from the BSP showed.
“With the US rate cut expected, the BSP can continue to accumulate as long as it does not cut the repo rate more aggressively than the Fed,” said Mr. Neri.
BSP chief Eli M. Remolona, Jr. said the Monetary Board could bring about a 25-bp rate cut in its two remaining meetings this year on Oct. 16 and Dec. 19.
The BSP expects the country’s GIR to reach $106 billion by the end of 2024.
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