Forex buffer down slightly to $112.43 billion in October

MANILA, Philippines — After increasing for five straight months, the country’s foreign exchange buffer went down to $112.43 billion in October from an all-time high of $112.71 billion in September as the national government settled its foreign debt.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the gross international reserves (GIR) level is equivalent to 8.1 months’ worth of imports of goods and payments of services and primary income.

The buffer is also 4.5 times the country’s short-term external debt based on residual maturity.

“The month-on-month decrease in the GIR level reflected mainly the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the central bank said.

Data showed foreign investments stood at $94.36 billion in October, 0.8 percent lower than the $95.2 billion a month ago. Still, this is 11.5 percent higher than the $84.7 billion in the same time last year.

Meanwhile, the BSP’s foreign exchange holdings increased by 6.4 percent to $2.17 billion in October from $2.04 billion in September. It surged by 75 percent from $1.24 billion a year ago.

 The value of the central bank’s gold holdings went up by 4.5 percent to $11.35 billion in September from $10.86 billion in August. Year-on-year, it grew by 7.4 percent from $10.57 billion.

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

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 reaching $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 projects the country’s dollar reserves to hit $104 billion this year and $105 billion next year.