Foreign reserves break new record anew in June
MANILA, Philippines — Foreign reserves inched up to a fresh all-time high in June, benefiting from large sums of dollars generated from government loans to fund a costly coronavirus disease-2019 (COVID-19) pandemic response.
Gross international reserves amounted to $93.32 billion as of end last month, adding $30.5 million from the previous month’s level, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.
The tally put the central bank on its way to beating its upwardly revised projection of $95 billion worth of reserves by year-end. That forecast was revised anew from $90 billion seen just last May.
Reserves serve as buffer funds during external shocks and are being kept to help service external obligations like imports in times of need. As of June, reserves can fund an average of 8.4 months’ worth of imports, falling above the global standard of at least 6 months.
Compared with short-term debts falling due within 12 months, reserves were equivalent to 4.8 times of our foreign liabilities based on remaining maturity.
Apart from acting as savings during rainy days, BSP also uses dollars in reserves to temper the abrupt rise and fall of the peso, which could be detrimental to businesses such as exporters as well as consumers such as remittance earners.
This happens, for instance, by either buying or selling more dollars which consequently weakens or strengthens the demand for peso. A higher demand for a currency makes it stronger, and vice-versa.
With the peso currently trading strongly at P49 to a dollar, BSP has no reason to sell its dollars to make it stronger. As a result, dollars pile up on reserves, which in June mainly came from the “national government’s foreign currency deposits with the BSP.” At the time, around $7 billion in foreign financing against COVID-19 had been signed off.
Broken down, BSP data showed the bulk of reserves were in the form of foreign investments amounting to $80.81 billion, up slightly from May. The next was in the form of gold whose value was steady at $8.02 billion.
Reserves in foreign currencies such as the US dollar, euro and yen amounted to $2.59 billion, down month-on-month. Meanwhile, special drawing rights— the equivalent of a currency for the International Monetary Fund— were stable at $1.17 billion.
Finally, BSP’s investments with the IMF went up last month to $730.7 million, figures showed.
“These inflows were offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations,” BSP said.
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