Reserves adequate, says BSP

Monetary authorities still have enough resources to combat volatility in financial markets that could lead to wild swings in the peso’s value, despite the sharp drop last month in the country’s dollar reserves.

The Bangko Sentral ng Pilipinas (BSP) stressed that the country’s gross international reserves (GIR) were still at more than optimal levels by any internationally-accepted measurement.

Data released on Friday showed the country’s GIR, which serve as the last line of defense from external economic shocks, stood at $78.938 billion in January. This was $4.3 billion lower than the $83.17 billion recorded the previous month.

The BSP attributed the drop to its foreign exchange operations.

Although the BSP allows market forces to determine the peso’s movements, the central bank intervenes in foreign exchange markets from time to time to smoothen out extreme movements in the peso’s value against the US dollar.

“It’s still more than adequate based on any metric,” BSP Governor Amando M. Tetangco Jr. said Friday evening.

Despite being at their lowest level since June 2012, the country’s reserves were still enough to cover 11.3 months-worth of the country’s imports of goods and services.

This was still significantly more than the three months-worth of imports that reserves need to pay for to be considered safe, based on international standards.

Apart from measuring reserves based on the number of months-worth of imports that it can pay, the GIR can also be considered high if measured by the amount of the country’s short-term external debt it can cover.

The Philippines’ GIR as of January was also equivalent to 5.6 times the country’s short-term external debt. This was better than the 1:1 ratio that is considered healthy, Tetangco said.