Philippine dollar reserves hit new two-year high

MANILA, Philippines — Fresh foreign borrowings by the Philippine government during its first trip to the international bond market this year pushed the country’s dollar reserves up to a new two-year high in May, the Bangko Sentral ng Pilipinas (BSP) reported.

Preliminary data from the BSP showed the country’s gross international reserves (GIR) rose by 1.8 percent month-on-month to $104.48 billion, the highest since April 2022.

Similarly, the net international reserves—which refers to the difference between the GIR and liabilities like short-term foreign debt, as well as loans from the International Monetary Fund (IMF)—increased to $104.46 billion in May from the preceding month’s level of $102.59 billion.

The GIR serves as the country’s buffer against external shocks. The BSP’s reserve assets include foreign investments, gold, foreign exchange, reserve position in the IMF, and special drawing rights.

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By convention, GIR is deemed 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 reserves are also considered adequate if they provide at least 100 percent cover for the payment of the country’s foreign liabilities—both from the public and private sectors—falling due within the immediate twelve-month period.

$2B from dollar bond issuance

In a statement, the BSP mainly attributed the month-on-month increase in the dollar reserves to hefty deposits from the national government, which included the $2 billion raised from its issuance of dual-tranche US dollar bonds in May, the Marcos administration’s first offshore fundraising activity this year.

The central bank also contributed to the increase in GIR with its net income from investments abroad.

Figures showed the May GIR level was equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income. It is also about 5.9 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

The central bank projects the GIR to end at $103 billion in 2024, a tad lower than last year’s level of $103.8 billion.

That forecast was based on the assumption that the Philippines would post a dollar surplus of $700 million this year, higher than the earlier forecast of a $400 million windfall on expectations of improvements in the country’s external position.