Forex reserves hit record-high $112 billion

MANILA, Philippines — The country’s foreign exchange buffer rose for a fifth straight month in September, reaching an all-time high of $112 billion on the back of higher foreign borrowings by the national government and rising gold prices in the world market.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s gross international reserves (GIR) as of end-September was 3.8 percent higher than the $107.9 billion recorded as of end-August.

“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 the issuance of ROP (Republic of the Philippines) global bonds,” the BSP said.

Data showed foreign currency deposits stood at $2.03 billion as of end-September, more than double the $789.5 million as of end-August. It was also 142 percent higher than the $834.4 million a year ago.

The BSP also attributed the higher GIR to the upward valuation adjustments in its gold holdings due to the increase in the price of gold in the international market as well as net income from the central bank’s investments abroad.

The BSP’s foreign investments rose by 2.4 percent to $94.52 billion in September from $92.27 billion in August, making up the bulk of the country’s foreign exchange reserves.

The value of the central bank’s gold holdings jumped by 6.3 percent to $10.86 billion in September from $10.22 billion in August.

Last month, a report from online brokerage BestBrokers said the BSP sold 24.95 tons of gold in the first semester, which caused its gold reserves to decline by 15.7 percent to 134.06 tons compared to the fourth quarter last year.

But the BSP clarified that selling gold is a part of its investment strategy in managing the country’s GIR, which serves as a buffer to ensure that the Philippines will not run out of foreign exchange that it can use in case of external shocks.

According to the central bank, the buffer as of end-September was equivalent to 8.1 months’ worth of imports of goods and payments of services and primary income. It is also about 6.3 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.

By convention, GIR is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.

It is also considered adequate if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate 12-month period.

After hitting $110.12 billion in 2020, the buffer declined to $108.79 billion in 2021 and $96.15 billion in 2022, before picking up to $103.75 last year.

The BSP expects the country’s dollar reserves to hit $104 billion this year and $105 billion next year.