AMPLE international reserves and foreign exchange inflows would prevent the Philippine peso from weakening to beyond P57 against the greenback in the medium term, according to the Department of Finance (DOF).
Finance Secretary Benjamin E. Diokno said the country’s gross international reserves (GIR) as of-end October stood at $101.1 billion, which is enough to cover the country’s 7.5-months’ worth of imports.
The amount, Diokno argued, is “well above” the International Monetary Fund’s (IMF) Assessing Reserve Adequacy metric at 1.9 in 2023. (Related story: https://businessmirror.com.ph/2023/11/09/end-october-gir-hits-101-09b-highest-in-6-months/)
“Since the global financial crisis, the ratio of the country’s gross international reserves relative to the IMF’s ARA metric has been relatively higher than selected Asian and emerging market economies,” the DOF chief said in a recent speech.
“Having adequate reserves could reduce the likelihood of a balance of payment crisis, help preserve economic and financial stability against pressures on the exchange rates, and create space for fiscal autonomy,” Diokno added.
Furthermore, the finance chief explained that aside from ample international reserves, the Philippine peso would also be supported by “structural foreign exchange inflows.”
Diokno noted that the year-to-date average of the Philippine peso against the US dollar has reached P55.64, 2.1 percent weaker than the P54.48 average exchange rate recorded last year.
Nonetheless, the current year-to-date average is well within the economic managers’ exchange rate assumption for the year of P54 to P57, he pointed out.
“The government expects the peso-dollar exchange rate to be broadly stable at P53 to P57 for the remainder of the medium term,” Diokno said.
The finance secretary also argued that the recent appreciation of the Philippine peso against the US dollar contributed to the lowering of the national government’s debt-to-GDP ratio.
As of end-September, the state’s debt-to-GDP ratio eased to 60.2 percent, lower than its medium-term fiscal framework target of 61.2 percent for 2023.
“The below-target debt-to-GDP ratio resulted from the appreciation of the Philippine peso against the US dollar, redemption of securities exceeding the value of new issuances, and better than expected GDP growth rate,” the DOF official said.
Diokno said last year that the national government is keen on preventing the peso from weakening to P60 per the greenback.
Part of the measures that the national government undertakes to defend the peso is the utilization of the country’s GIR that is managed by the Bangko Sentral ng Pilipinas.