Forex reserves reach record high of $42.3 billion

MANILA, Philippines - The country’s gross international reserves (GIR) reached a new record high of $42.3 billion in September as a result of government foreign borrowing and the increase in the price of gold, the central bank reported yesterday.

Bangko Sentral ng Pilipinas officer-in-charge Nestor Espenilla Jr. said the latest GIR level was $800 million higher than the previous month’s revised record level of $41.5 billion.

“The increase in the end-September 2009 GIR level was due mainly to the foreign currency deposits by the National Government of the loan proceeds and by the authorized agent banks, revaluation gains in the BSP’s gold holdings arising from the higher price of gold in the international market, and net foreign exchange operations by the BSP as well as income from its investments abroad,” Espenilla said in a statement.

The GIR is the sum of all foreign exchange flowing into the country and net of all external payments for debt servicing and imports.

At the current level, Espenilla pointed out that the GIR level could cover 7.8 months worth of imports of goods and payments of services and income.

He added that the reserves were also equivalent to 7.6 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

Data showed that major foreign exchange inflows during the month included revaluation gains in the BSP’s gold holdings to $5.01 billion as of end-September from $4.83 billion as of end-August on account of the rise in the price of gold in the international market.

Another major source was foreign currency deposits by the National Government that has so far borrowed $2.25 billion from the international capital market to finance its swelling budget deficit.

Espenilla also cited the general allocation of Special Drawing Rights which was made available by the International Monetary Fund to its members, including the Philippines.

“The IMF’s move to increase SDR allocation is a liquidity enhancing measure aimed at providing financial resources to all member countries and forms part of the cooperative monetary response to the global financial crisis,” he said.

SDRs increased to $1.14 billion as of end-September from $1.03 billion in end-August while the BSP’s investments abroad reached $35.541 billion from $35.023 billion

The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. The IMF implemented a general allocation of $283 billion last August due the response to the call by the G-20 heads of state and the IMF’s International Monetary and Financial Committee at their respective meetings in April 2009.

The central bank had projected the country’s foreign exchange reserve to reach only $38.5 billion this year instead of the earlier forecast of $39 billion as the growth in remittances grinds to a halt this year due to job losses abroad.

With the down scaling of the projected reserves, the government also revised its projected balance of payments position to $700 million due to lower oil prices.