PH ends 2020 with historic high $110-B reserves

MANILA, Philippines — The Philippines ended 2020 with the highest amount of dollar reserves in the country’s history as the contracting economy spent less for imports of raw materials and intermediate goods and the government borrowed more from abroad to fund its fight against the pandemic.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its gross international reserves (GIR) were also boosted by the agency’s foreign exchange trading operations, resulting in a yearend tally of $109.8 billion based on preliminary data, higher by $4.98 billion from the end-November 2020 level of $104.82 billion.

“The latest [GIR] level represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the central bank said.

Adequate reserves

This buffer is equivalent to 11.7 months’ worth of imports of goods and payments of services and primary income. By convention, dollar reserves are viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.

The end-2020 level is also worth 9.6 times the country’s short-term external debt based on original maturity and 5.5 times based on residual maturity. Short-term debt based on residual maturity refers to outstanding external debt with 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.

100% cover

The level of dollars 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 12-month period.

The central bank said the month-on-month increase in the dollar reserve level reflected inflows mainly from the BSP’s foreign exchange operations, the national government’s foreign currency deposits with the BSP of proceeds from its issuance of global bonds and revaluation gains from the monetary regulator’s gold holdings due to the increase in the price of the precious metal in the international market.

These inflows were partly offset, however, by the national government’s payments of its foreign currency debt obligations.

Similarly, the net international reserves — which refer to the difference between the BSP’s gross reserves and total short-term liabilities — increased by $5 billion to $109.8 billion as of end-December 2020 from the end-November 2020 level of $104.8 billion.