PH dollar stash rises to another historic high of $104B in November

MANILA, Philippines—The country’s dollar reserve level rose to another historic high in November pushed by the central bank’s earnings from its foreign exchange operations and foreign investments, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday (Dec. 15).

In a statement, the BSP said the Philippines’ gross international reserves, based on preliminary data, rose by $710 million to $104.51 billion as of end-November 2020 from the end-October 2020 level of $103.80 billion.

“The latest [dollar reserve] level represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the BSP said. It added that this buffer is equivalent to 11.2 months’ worth of imports of goods and payments of services and primary income.

By convention, a country’s dollar reserves are viewed to be adequate if they can finance at least three months’ worth of the local economy’s imports of goods and payments of services and primary income.

The dollar reserves are also worth an estimated 9.3 times the country’s short-term external debt based on original maturity and 5.3 times 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.

“The month-on-month increase in the [gross international reserve] level reflected inflows mainly from the BSP’s foreign exchange operations and income from its investments abroad,” the central bank said.

These inflows were partly offset, however, by the outflow of funds for payment of foreign currency debts and losses from the BSP’s gold holdings because of a decline in gold prices in the world market.

Net international reserves — which refers to the difference between the BSP’s gross reserves and total short-term liabilities — increased by $700 million to $104.49 billion as of end-November 2020 from the end-October 2020 level of $103.79 billion.

The level of dollar reserves, as of a particular period, is considered adequate, if it provides at least 100 percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate twelve-month period.

TSB