GIR up slightly to $94.1 billion in October

MANILA, Philippines — After declining for seven straight months, the country’s foreign exchange buffer increased to $94.1 billion in October from $93 billion in September, boosted by the proceeds from the global bond issuance by the national government, according to the Bangko Sentral ng Pilipinas (BSP).

It said the country’s gross international reserves (GIR) level is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

The buffer is also about 6.7 times the country’s short-term external debt based on original maturity and four times based on residual maturity.

“The month-on-month increase in the GIR level reflected mainly the national government’s net foreign currency deposits with the BSP, which include proceeds from its issuance of global bonds, and upward valuation adjustments in foreign currency-denominated reserves or non-gold reserves,” the BSP said.

The GIR is the sum of all foreign exchange flowing into the country and serves as buffer to ensure that it will not run out of foreign exchange that it can use in case of external shocks.

The GIR declined from February to September and has remained below $100 billion for the past four consecutive months as the BSP has been intervening in the foreign exchange market to smoothen the volatility, especially as the peso hit an all-time low of 59 to $1 several times last month.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the increase was largely brought about by the $2 billion global bond issuance in early October.

Ricafort also cited the narrowing of the country’s trade deficit from record levels in recent months.

Latest data showed the country’s trade deficit increased by 26.5 percent to $4.82 billion in September from $3.81 billion in the same month last year, but was lower than the all-time high of $6.02 billion in August.

Ricafort said the increase in the GIR was offset by some foreign debt payments, some intervention in the foreign exchange market that could have partly led to the $190-million month-on-month decline in foreign exchange holdings.

Likewise, the BSP’s gold holdings slightly declined to $8.27 billion in October from $8.33 billion in September due to the drop in gold prices in the world market.

“For the coming months, especially for the remaining months of the year, the GIR could still increase due to the seasonal increase, especially toward the holiday season in the latter part of the fourth quarter, from OFW (overseas Filipino worker) remittances, business process outsourcing revenues, foreign tourism, proceeds of the proposed dollar-denominated retail bond issuance by the national government and recent narrowing of the trade deficit imports from record levels,” Ricafort said.

The chief economist of the Yuchengco-led bank said the increase could still be offset by foreign debt payments and possible foreign exchange intervention activities, as signaled recently, alongside other measures to help stabilize the peso and overall inflation.

The peso yesterday shed three centavos to close at 58.58 to $1 from Friday’s 58.55 to $1.