Forex reserves surged to $67.8B in April

MANILA, Philippines—The Philippines’ gross international reserves, which indicate the country’s ability to pay for imports and service foreign debts, posted another record high partly due to the income of the central bank from its securities investments.

The Bangko Sentral ng Pilipinas reported on Friday that the GIR reached $67.8 billion in end-April, making it possible for the reserves to breach the $70-billion mark this year.

The latest GIR level was up from $65.98 billion in March and $46.94 billion in April last year.

“Foreign exchange inflows that contributed to the significant increase in the end-April 2011 GIR stemmed from the foreign exchange operations and income from investments abroad of the BSP,” the central bank said in a statement.

The BSP puts its investible funds in virtually risk-free assets, mainly US treasuries.

The central bank also said that rising prices of gold in the world market helped increase the value of the country’s GIR. Of the foreign reserves as of end-April, $7.6 billion were accounted for by the country’s gold holdings.

Comfortable cover

The latest GIR was enough to cover for 10.4 months’ worth of the country’s imports. Based on international standards, a GIR worth at least four months of import requirements is deemed comfortable.

The reserves as of April was also 6.1 times the country’s foreign currency-denominated debts maturing within a year.

Since April last year, the country’s GIR has been posting record highs as inflows of foreign currencies continued to grow.

The country’s usual sources of dollars and other foreign currencies were remittances from Filipinos abroad, income from exports, foreign portfolio investments and foreign direct investments largely to the business process outsourcing sector.

Central bank officials said the growing reserves of foreign currencies should give comfort to foreign creditors and the international community of the country’s ability to meet its obligations.

The record GIR was one of the factors cited by Standard & Poor’s and Moody’s Investors Service for their favorable ratings actions for the Philippines.

In November, S&P raised the country’s credit rating from three to two notches below investment grade.

In January, Moody’s Investors Service improved its outlook for the Philippines’ credit standing from “stable” to “positive,” indicating the probability of an actual credit-rating upgrade in the short term.