Dollar reserves inched higher in Feb on BSP’s trading gains

The country’s dollar reserves rose slightly at the end of February as the central bank gained from its forex exchange trading operations and income from overseas investments amid a dip in the value of the government’s gold holdings.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said its gross international reserves, based on preliminary data, rose by $410 million to $109.08 billion as of end-February 2021 from the previous month’s level of $108.67 billion.

On top of the decline in the price of gold, one additional factor that helped offset the gains for the month were foreign currency withdrawals made by the national government to repay its maturing foreign loans.

Nonetheless, the central bank said the latest dollar reserve level “represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks.”

This buffer is equivalent to 11.7 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 9.5 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

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.

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.

Dollar reserves, as of a particular period, are also considered adequate, if they provide 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.

Meanwhile, the net international reserves—which refers to the difference between the central bank’s gross reserves and total short-term liabilities—increased by $410 million to $109.08 billion as of end-February 2021 from the previous month’s level of $108.67 billion.