Foreign currency reserves serving as the country’s last line of defense from external crises rose to a four-month high as of the end of June, providing a comfortable buffer for the economy amid volatile times ahead.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s gross international reserves (GIR) were enough to cover more than 10 months worth of imports and four times foreign loan payments that will fall due in the next 12 months.
Preliminary data showed that the country’s GIR rose to $80.8 billion as of end-June 2015, up by $0.4 billion from the $80.4 billion in May.
“The increase in reserves was due mainly to the net foreign currency deposits by the government and the BSP’s foreign exchange operations, income from its investments abroad and revaluation adjustments on its foreign currency-denominated reserves,” the statement read.
These were partially offset by the state’s payments for its maturing foreign exchange obligations and revaluation adjustments on the BSP’s gold holdings.
Reserves remained ample as it can cover 10.6 months’ worth of imports of goods and payments of services and income. This is above the three to six months that is considered safe by international standards.
The country’s reserves, which are held by the central bank, were also equivalent to 4.5 times the country’s short-term external debt based on residual maturity. Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.
Changes in the GIR are seen as an indicator for the country’s balance-of-payments (BOP) position, which is an accounting of all the money that comes in and goes out of the economy in any given period.
Inflows come in the form of remittances, revenues from certain industries, such as business process outsourcing (BPO) and tourism, investments and export sales. Foreign debt payments, the importation of goods and divestment by foreign funds are counted as outflows.