THE PHILIPPINES’ foreign exchange reserves rose to its highest level in over two years, mainly due to the increase in the central bank’s earnings from its foreign investments.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that gross dollar reserves inched up by 0.18% to $106.92 billion as of end-August from $106.74 billion as of end-July.
“The month-on-month increase in the GIR (gross international reserves) level reflected mainly the net income from the BSP’s investments abroad,” the central bank said in a statement.
Year on year, the country’s dollar buffers rose by 7.39% from $99.57 billion in August 2023.
The dollar reserves in August were also at their highest level in 29 months or since the $107.3 billion in March 2022.
As of end-August, the level of dollar reserves was enough to cover about 6.1 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.
It was also equivalent to 7.9 months’ worth of imports of goods and payments of services and primary income.
Ample foreign exchange buffers shield an economy from market volatility and ensure the country can pay its debts in case of an economic downturn.
BSP data showed that foreign investments went up by 0.33% to $91.41 billion as of end-August from $91.11 billion a month ago, and by 8.65% from $84.13 billion in the same month last year.
Reserves in the form of gold were valued at $10.22 billion as of end-August, slipping by 0.88% from $10.31 billion in the previous month and by 0.1% from $10.23 billion a year ago.
On the other hand, net foreign currency deposits slipped by 4.4% to $773.4 million from $809 million month on month. However, this increased by 19.98% from $664.6 million a year earlier.
Net international reserves as of end-August went up by 0.19% to $106.9 billion from $106.7 billion last month.
Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).
The Philippines’ reserve position in the IMF increased by 0.83% to $725.9 million as of end-August from $719.9 million as of end-July. However, this was an 8.16% drop from $790.4 million a year ago.
Special drawing rights, or the amount the country can tap from the IMF, rose by 0.2% to $3.8 billion from $3.79 billion last month. It also increased by 0.72% from $3.77 billion last year.
“The continued increase in the GIR could be attributed to the continued increase in the country’s structural US dollar inflows such as overseas Filipino worker remittances, BPO (business process outsourcing) revenues, exports, foreign investments (foreign direct investments and foreign portfolio), among others,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In the first half, cash remittances jumped by 2.9% year on year to $16.25 billion.
Hot money yielded a net inflow of $1.46 billion in the January-to-July period, surging by 830.7% from the $157.3-million inflows in the same period a year ago.
In the January-to-May period, net inflows of foreign direct investments jumped by 15.8% year on year to $4.024 billion.
“For the coming months, GIR could still increase due to proceeds of the National Government’s $2.5-billion global bond issuance in the latter part of August 2024, and the remaining $500-million global bond issuance programmed for the rest of 2024,” Mr. Ricafort said in a Viber message.
Last month, the government raised $2.5 billion from a three-tranche US dollar-denominated global bond offering. In May, $2 billion was raised from the issuance of global bonds.
The government has yet to borrow $500 million out of the total $5-billion borrowing plan for this year.
The BSP expects the GIR level to settle at $104 billion by yearend. — Beatriz Marie D. Cruz