MANILA, Philippines - The country's external liquidity position further improved in August, with gross international reserves [GIR] climbing to a record $41.3 billion.

According to the Bangko Sentral ng Pilipinas, the GIR in August was 2.7 percent higher than the $40.2 billion seen in July.

GIR is the total amount of foreign currency reserves and gold kept at and managed by the central bank. It indicates the country’s ability to engage in commercial transactions with the rest of the world, such as payment for imports and settlement of foreign currency-denominated debts.

According to the BSP, about 74 percent of the country’s GIR are in US dollar, 16 percent in yen, 8 percent in euro and the rest are in gold and other currencies.

In a statement, the BSP said the rise in foreign exchange reserves was partly due to the income generated by the central bank from its operations and other investments offshore. The BSP’s investments are mostly in US treasuries.

The increase in reserves more than offset the decline caused by the government’s payment of maturing obligations abroad and the drop in gold prices.

The BSP said that the latest GIR would be enough to cover 7.1 months worth of the country’s import requirements.

It was also equivalent to 6.6 times the country’s short-term external debts based on original maturity and 3.3 times based on residual maturity.

Short-term debts based on residual maturity have maturities of one year or less, plus principal payments for medium- to long-term loans that will mature in the next 12 months.

Inflows of foreign currencies have led to unprecedented growth in the country’s GIR, now one of Asia’s largest reserves.

According to the Asian Development Bank, the country’s GIR was the 10th largest as of 2008, when it stood at $33 billion.

Earlier, the ADB urged central banks in developing countries in Asia to consider investing a portion of the reserves to more productive activities.

The ADB said Asian countries had amassed huge foreign currency reserves, which could be put to better use by funding developmental projects instead of placing them in US treasuries and other risk-free assets.

But the BSP said it preferred to keep its conservative way of managing the Philippines’ GIR.

BSP Deputy Governor Diwa Guinigundo earlier said the central bank had a mandate to ensure external liquidity, and so it would continue investing the GIR only in safe instruments.

Guinigundo said Southeast Asian countries have learned from the Asian financial crisis of 1997 that maintaining healthy levels of foreign exchange reserves was essential to ensure stability of the financial sectors.

The central bank official said it would be prudent for countries to have high reserves than rely solely on institutions like the International Monetary Fund for liquidity support in case of crisis.

“The IMF did not have a quick disbursing facility, and so we [Asian countries] deemed it prudent to increase the reserves,” Guinigundo said.