PH forex reserves still at record high

The Philippines’ foreign exchange reserves hit a record high in July due mainly to an increase in the value of the gold holdings of the Bangko Sentral ng Pilipinas, giving policy makers a wider buffer to deal with any external economic shocks, the central monetary authority said Friday.

BSP Governor Amando Tetangco Jr. said its gross international reserves (GIR) rose to $85.49 billion as of end-July this year. This was higher by $210 million than the previous month’s $85.28 billion.

The marginal increase was “due mainly to the BSP’s foreign exchange operations, revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market and its income from investments abroad, as well as net foreign currency deposits by the national government”, he said.

These increases were partially offset by payments made by the national government for its maturing foreign exchange obligations.

The end-July 2016 level of dollar reserves were enough to cover 10.5 months’ worth of imports of goods and payments of services and income—a closely watched measure that determines a country’s ability to absorb shocks caused by external factors like financial market contagion.

The latest GIR level was also equivalent to 6 times the country’s short-term external debt based on original maturity and 4.3 times based on residual maturity, the BSP said. Short-term debt based on residual maturity refers to outstanding external debt with an original maturity of a 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.

Net international reserves, which refer to the difference between the BSP’s GIR and total short-term liabilities, also increased by $210 million to $85.49 billion as of end-July 2016, compared to the end-June 2016 net reserve position of $85.28 billion.