THE Bangko Sentral ng Pilipinas (BSP) reported on Friday a $4.98-billion rise in the country’s dollar defenses in the last month of 2020.
The Philippines’s gross international reserves (GIR) hit $109.8 billion in December last year, up from November’s $104.82 billion. It is also significantly higher than the $87.84-billion GIR level seen in end-December 2019.
The country’s GIR is the level of foreign-exchange holdings that is 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 the BSP’s foreign-exchange operations, national government’s (NG) foreign-currency deposits with the BSP of proceeds from its issuance of ROP Global Bonds, and revaluation gains from the BSP’s gold holdings due to the increase in the price of gold in the international market.
The GIR could have been larger, the BSP added, if not partly offset by the NG’s payments of its foreign-currency debt obligations.
At this level, the BSP expressed confidence that the Philippines’s dollar reserves are more than adequate to protect the economy from external shocks.
“The latest GIR level represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the BSP said.
“This buffer is equivalent to 11.7 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 9.6 times the country’s short-term external debt based on original maturity and 5.5 times based on residual maturity,” it added.
In its recent rating action commentary, Fitch Ratings lauded the Philippines’s ability to keep its international reserves high in a time of global economic strain.
“The Philippines’s external finances remain a credit strength. Foreign-currency reserves remain high and gross external debt levels are manageable,” Fitch said.
Image credits: Nonie Reyes