Forex reserves hit record $63.9 B in Feb

MANILA, Philippines - The country’s foreign exchange reserves hit a new record level of $63.95 billion as of end-February due to the steady rise in the earnings of the central bank’s overseas investments and foreign exchange operations as well as the higher value of its gold holdings, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP officer-in-charge Juan de Zuniga Jr. said last month’s gross international reserves (GIR) level was 39.7 percent or $18.2 billion higher than the reserves level of $45.76 billion posted in February last year.

De Zuniga said the GIR level was also $410 million higher than the $63.54 billion booked in January. The GIR is the sum of all foreign exchange flowing into the country.

He pointed out that the increase could be traced to the higher income from the BSP’s investments abroad and foreign exchange earnings as well as revaluation of its existing gold holdings.

“Major inflows that contributed to the increase in the GIR level consisted of receipts from foreign exchange operations and income from investments abroad of the BSP, as well as revaluation gains on the BSP’s gold holdings arising from the sustained increase in gold prices in the international market,” he added.

Data showed that the central bank’s income from investments abroad surged 42.7 percent to $55.15 billion in February from $38.63 billion in the same month last year while its income from its foreign exchange operations climbed by 8.9 percent to $333.64 million from $306.43million.

Furthermore, the value of the its gold holdings went up by 24.9 percent to $6.97 billion in February from a year-ago level of $5.58 billion while special depositary receipts from the International Monetary Fund (IMF) inched up by 1.9 percent to $1.14 billion from $1.11 billion.

The BSP OIC said the inflows were partially offset by payments for maturing foreign exchange obligations of the National Government.

De Zuniga explained that the end-February GIR could cover 10.5 months worth of imports of goods and payments of services and income as well as 11.1 times the country’s short-term external debt based on original maturity and 6.1 times based on residual maturity.

In 2010, the country’s reserves surged 41 percent to a record $62.37 billion from 44.24 billion in 2009. This year, the BSP sees the GIR hitting a new record level of between $68 billion and $70 billion.

The BSP also sees the country’s balance of payments (BOP) posting a surplus of  about $6 billion to $8 billion this year from a record $14.4 billion in 2009 on the back of strong overseas Filipino workers’ (OFW) remittances, high earnings of the business process outsourcing (BPO) sector, sustained export growth as well as surging capital flows.

The country’s strong external payments position helped the Philippines get a credit rating outlook upgrade from New York-based Moody’s Investors Service last January as well as a credit rating upgrade from Standard and Poors last November 12.

Moody’s upgrade the country’s credit rating outlook to positive from stable while S&P raised the credit rating for the government’s long-term, foreign currency-denominated debt issuances to two notches below investment grade.

Moody’s, S&P, and London-based Fitch Ratings are closely watching the economic and fiscal developments in the Philippines.

However, Moody’s has yet to upgrade the country’s sovereign credit rating that is currently pegged at three notches below investment grade. S&P and Fitch, on the other hand, rate Philippine debt at two notches below investment grade with a stable outlook.