More foreign debt, more dollars: October foreign currency stash up

AFP PHOTO

MANILA, Philippines—A large influx of foreign currency from the national government’s dollar denominated bond issue pushed the country’s gross international reserves higher in October, the central bank said on Friday (Nov 12).

In a statement, the Bangko Sentral ng Pilipinas (BSP₱ said that, based on preliminary data, the country’s total dollar stash rose by $1.35 billion to $107.95 billion as of end-October 2021 from the end-September 2021 level of $106.6 billion.

“The month-on-month increase in the [dollar reserve] level reflected mainly the national government’s net foreign currency deposits with the BSP and upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market,” the agency said.

The government recently issued retail onshore dollar bonds and deposited the proceeds amounting to $1.593 billion with the BSP.

The central bank said the latest dollar reserve level represents a “more-than-adequate” external liquidity buffer equivalent to 10.8 months’ worth of imports of goods and payments of services and primary income.

By convention, dollar reserves is 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.

This level is also about 7.8 times the country’s short-term external debt based on original maturity and 5.4 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 level of international 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.

The central bank said that its net international reserves — which refers to the difference between the BSP’s gross dollar holdings and total short-term liabilities — increased by $1.35 billion to $107.93 billion as of end-October 2021 from the end-September 2021 level of $106.58 billion.

TSB