THE Bangko Sentral ng Pilipinas (BSP) was able to grow the Philippines’s dollar defenses by $710 million in a month’s time, bolstering the economy’s buffer against sudden shocks, especially amid the global health crisis.
The Central Bank reported on Wednesday that the country’s gross international reserves (GIR) hit $104.51 billion as of end-November this year. This is higher than the previous month’s $103.8 billion. It is also $18.27 billion higher than last year’s $83.23-billion GIR level.
The country’s GIR is the level of foreign exchange holdings being managed by the Central Bank 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’s statement, the month-on-month increase in the GIR level reflected inflows mainly from its foreign-exchange operations and income from its investments abroad.
The BSP said the increase in the country’s GIR could have been larger, if not partly offset by the foreign currency withdrawals the national government made to pay its foreign currency debt obligations and revaluation losses from the BSP’s gold holdings due to the decrease in the price of gold in the international market.
At this level, the BSP said the country’s GIR is “adequate” enough to provide a liquidity buffer for the country and can help cushion the domestic economy against external shocks.
BSP estimates that the current GIR level is equivalent to 11.2 months’ worth of imports of goods and payments of services and primary income. It is also about 9.3 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity.
The Philippines’s GIR has been rising significantly faster this year, as the dollar remains weak against the peso.
In 2016 the country’s GIR was at $81 billion and reached $82 billion in 2017. It then dipped to $79 billion in 2018, then recovered to $87 billion last year.
Broken down by GIR component, the country’s gold holdings declined the most during the period. From $11.655 billion in end-October this year, gold holdings are now valued at $10.75 billion in November.
On the other hand, inflows from foreign investments registered the highest growth to hit $89 billion from the $87.4 billion in the previous month.
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