PH dollar reserves hit another historic high, breaching $100-B threshold

by Daxim L. Lucas, Philippine Daily Inquirer, 15 Oct 2020

MANILA, Philippines – The country’s dollar reserves rose to their highest level in history for the 12th consecutive month and, more importantly, breached the $100-billion threshold at the end of September due to the central bank’s currency market operations and the national government’s foreign loans.

In a statement, the Bangko Sentral ng Pilipinas said its gross international reserves, based on preliminary data, rose by $1.54 billion to $100.49 billion as of end-September 2020 from the end-August 2020 level of $98.95 billion.

“The month-on-month increase in the [dollar reserve] level reflected inflows mainly from the BSP’s foreign exchange operations and national government’s foreign currency deposits with the BSP,” the agency said.

These inflows were partly offset, however, by the revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market and foreign currency withdrawals made by the national government to pay its foreign currency debt obligations.

The central bank said its latest gross international reserve level “represents a more than adequate external liquidity buffer, which can cushion the domestic economy against external shocks.”

This buffer is equivalent to 10 months’ worth of imports of goods and payments of services and primary income. It is also worth about 9.2 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

Similarly, net international reserves — which refers to the difference between the BSP’s gross reserves and total short-term liabilities — increased by $1.53 billion to $100.48 billion as of end-September 2020 from the end-August 2020 level of $98.95 billion.

In general, a country’s dollar reserves are viewed as adequate if they can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income. They are also considered adequate if they provide at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within a year.

From only $3.2 billion in 1980 — and then again being nearly depleted during the 1997 East Asian financial crisis — the Philippines’ stash of foreign currency held by the central bank rose steadily during the last 40 years to reach last month’s historic milestone.

BSP Governor Benjamin Diokno had earlier predicted that dollar reserves would breach the $100-billion mark and assured that this level would remain “robust” in the near term with exports, remittances, and investments rebounding amid the gradual opening of business sectors across the globe.