GIR edges up to $16.123-B in August

The country’s gross international reserves (GIR) increased slightly to $16.123 billion in August, from $16.117 billion in July as the government finished front-loading its borrowings and paid off some of its maturing obligations.

The Bangko Sentral ng Pilipinas (BSP) said it expects the GIR to continue going down until the end of the year, adding that there is no cause for worry since the country is already well above its $14-billion GIR target for the whole year.

Comprising mostly of US dollars, the GIR is the total foreign currency holding of the central bank including gold and special drawing rights, the currency used by the International Monetary Fund (IMF).

According to BSP Governor Rafael Buenaventura, the decline in international reserves was expected since the government periodically pays either maturing obligations and interest rate payments on existing loans.

"The downward trend is likely to continue," Buenaventura said. "But that’s okay. We have enough." Buenaventura said the strength of the government’s reserve position would help keep the foreign exchange on an even keel. He said domestic liquidity reflects an improvement in the preference for peso-denominated deposits relative to foreign currency deposits.

This indicates growing confidence on the stability of the Philippine currency despite the external factors such as the weakness in regional currencies and the dollar itself.

The country’s reserves peaked in March at $17.359 billion after the government booked the proceeds from the flotation of some $1 billion worth of bonds, with the Hongkong and Shanghai Banking Corp (HSBC) as global coordinator. The issue had J.P. Morgan and Deutsche Bank as lead arrangers.

The recently-concluded issuance of the BSP’s $500 million worth of bonds will not be reflected until September when the government draws down the proceeds to pre-pay a $750-million loan that the government borrowed last year.

The BSP’s net international reserves, on the other hand, went down to $12.764 billion from $13.505 billion in June.

The current level of reserves could adequately cover about five months worth of imports of goods and payment of services and income, Buenaventura said. In terms of short-term debt coverage, the BSP said the end-August GIR was equivalent to three times based on original maturity or 1.4 times based on residual maturity.

Government economists said exports for the whole of 2002 are likely to grow four percent from a year ago with an expected recovery in the US economy.

Using other reserve coverage measures, the central bank said the level of reserves is 3.2 times the amount of the country’s short-term external debt based on original maturity.

The country’s total reserves, mostly in US dollars, are way above this year’s full-year projection of $14 billion to $15 billion. BSP said the country’s reserves will continue to rise along with the improvement in the country’s economic outlook that even credit rating agencies have started to take note of.

According to the BSO, its net international reserves as of end-August dipped by $97 million, declining to $12.657 billion from $12.754 billion a month ago. – Des Ferriols