PHL dollar reserves rise to ‘all-time high’

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AMID concerns that the conflict between the United States and Iran could bring risk back to markets, the Bangko Sentral ng Pilipinas (BSP) on Tuesday reported that the country’s dollar reserves hit an all-time high as of end-December 2019.

Preliminary data released by the BSP indicated that the gross international reserves reached $87.86 billion in December, higher than the $86.23 billion posted in November. The GIR as of the end of the year is the highest on record for the Philippines.

The country’s GIR is the level of foreign-exchange holdings the BSP has during a given period. The GIR is a crucial component of the economy as it is often used to manage the country’s foreign-exchange rate against excess volatility.

According to the BSP, the month-on-month increase in the GIR level reflects the inflows arising from its foreign-exchange operations and income from its investments abroad, and the national government’s net foreign-currency deposits.

The inflows could have been higher, it said, if not partially offset by outflows representing payments made by the NG on its foreign-exchange obligations during the month.

Should the country need to draw foreign currency reserves to finance its payables, the current GIR level provides an ample external liquidity buffer that is equivalent to 7.7 months’ worth of imports of goods and services, and payments of primary income.

It is also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4.3 times based on residual maturity.

Risks flagged

The rise in the country’s GIR comes at a time when several economists are flagging risks to the country’s current account deficit, as well as the value of the local currency against the dollar.

This as rising tensions were seen across the world at the beginning of 2020. Among the risks to markets are the uncertainty of global trade, a muted global growth and, most recently, the US attack in Baghdad that killed a top Iranian general. These were seen to affect local oil prices as well as influence the movement of local currency.

The GIR took a beating toward the end of the year in 2018, plunging to seven-year lows as the BSP battled to smoothen out volatilities in the depreciating value of the local currency against the dollar.

It also came at a time when sentiment was down due to the accelerating inflation, which also peaked at 6.7 percent in September and October.

The GIR hit its lowest level in 2018 at $74.7 billion in October.

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