Dollars from global bond sale lift reserves to all-time high in May
MANILA, Philippines — Fresh funds raised through the government's recent global bonds sale to support coronavirus programs pushed up the country's reserves to an all-time high in May, the Bangko Sentral ng Pilipinas reported Tuesday.
Gross international reserves stood at $93.29 billion last month, up by $2.35 billion from April's level of $90.94 billion and hitting a new record. The amount of buffer funds already surpassed the central bank's year-end forecast of $90 billion.
Foreign reserves are assets held mostly as investments in foreign-issued securities, gold as well as foreign currencies like dollar and euro. Being the lender of last resort, the BSP manages reserves as a stand-by fund to help the economy stay afloat in times of external shocks.
According to the central bank, year-to-date reserves are sufficient to pay for 8.4 months' worth of imports, well above the global standard of at least six months cover.
Reserves were also equivalent to 7 times the country's short-term external debt, due within 12 months or less, based on original maturity and 4.6 times based on residual maturity.
Broken down, reserves increased as a result of the goernment's deposit with the BSP of proceeds from its global bonds offering in April. The government raised $2.35 billion in funding through the issuance, which will be used to augment the state's war chest against the virus.
Central bank earnings from its investments abroad and foreign exchange operations likewise boosted the reserves. However, the inflows were partially offset by foreign currency withdrawals made by the government to pay for its maturing external debts.
The surge in reserves bodes well for the country's external position that gauges the capacity of the government to meet foreign obligations like imports and foreign debts. This is measured through the balance of payments (BOP).
Much more, both a BOP surplus and high reserves provide support for the peso. The local unit has so far traded within or stronger than P50-P54 average band assumed by the economic managers for the year. On Tuesday, the peso finished trading at P50.19 against the US dollar, five centavos weaker than its previous closing of P50.14.
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