Forex reserves hit 4-month high at $83.2B
August level enough to cover a year’s requirementsBy Paolo G. Montecillo |Philippine Daily Inquirer
The country’s foreign exchange reserves reached a four-month high of $83.2 billion in August, ensuring that the country has a sufficient buffer to keep the economy afloat in case of a potential shortage of income from abroad.
Bangko Sentral ng Pilipinas (BSP) data released Friday showed that the gross international reserves (GIR) were enough to cover at least a year of the country’s imports and eight times the total external debt maturing in 12 months or less.
“The increase in reserves was due mainly to inflows from revaluation gains on the BSP’s gold holdings, foreign exchange operations and net foreign currency deposits by the Treasury of the Philippines,” the central bank said in a statement.
These inflows were partially offset by withdrawals by the national government, which paid off maturing obligations during the month. The country’s GIR for August inched up from July’s $83.17 billion. It was the highest level since April’s $83.21 billion.
“At this level, reserves can adequately cover 12 months’ worth of import of goods and payments of services and income,” the BSP said.
Net international reserves, which refer to the GIR net of short-term liabilities, reached $83.2 billion as of the end of August, up $28 million from the month before.
The BSP’s reserves serve as the country’s last line of defense in case of a possible shortage of foreign currency entering the country, which is referred to as a balance-of-payments or BOP crisis.
A shortage in foreign exchange would make it difficult for local companies to get goods or services that need to be paid in dollars or currencies other than the peso. This shortage would also prompt the central bank to print more money to buy foreign exchange to allow the government to pay for its dollar loans—resulting in a weaker peso.
Having reserves means the central bank can release dollars into the economy to cover any potential shortfall in the country’s foreign exchange needs.
The country’s main sources of foreign income are remittances from overseas Filipino workers (OFWs), income from the business process outsourcing (BPO) sector and tourism receipts.