PH dollar reserves rose in November

The country’s foreign exchange reserves rose slightly in November as the relative strength of the peso in the weeks following the central bank’s aggressive string of rate increases pushed many dollar holders to liquidate their positions.

Preliminary data from the Bangko Sentral ng Pilipinas showed that the country’s gross international reserves (GIR) rose to $75.49 billion as of end-November 2018.

This was higher than the $74.71 billion recorded in October 2018 due mainly to inflows arising from the BSP’s foreign exchange operations and its income from its investments abroad.

However, the increase in the dollar reserve level was partially tempered by the payments made by the national government for its foreign exchange obligations and its net foreign currency withdrawals as well as the revaluation adjustments on the BSP’s gold holdings resulting from the decrease in the price of gold in the international market.

In a statement, BSP Governor Nestor Espenilla Jr. said the end-November 2018 dollar reserve level “continues to serve as an ample external liquidity buffer.”

It is equivalent to 6.9 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 5.8 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity. The BSP defines short-term debt based on residual maturity as outstanding foreign debt whose original maturity is a year or less, plus principal payments on medium- and long-term loans of the government as well as the private sector that are due within the next 12 months.

Net international reserves —which refer to the difference between the BSP’s total dollar reserves and total short-term liabilities—likewise increased by $780 million to $75.47 billion as of end-November 2018 from the end-October 2018 level of $74.69 billion.

The central bank has so far raised interest rates by a total of 175 basis points since May of this year in an effort to control the inflation surge. The resulting higher interest rates for Philippine assets have deterred some of the foreign currency outflows of recent months that were responsible for the decline in the dollar reserves in prior months.