The Philippines’ reserves of foreign currencies, which indicate the country’s ability to pay for imports and service debts to foreign creditors, are seen to have reached a new high of between $78 billion and $79 billion as of the end of July.
The gross international reserves (GIR) are seen further growing in the months ahead, to be boosted by the sustained rise in dollar inflows—mainly in the form of remittances, foreign portfolio investments and foreign investments in the business process outsourcing sector.
Given this backdrop, the Bangko Sentral ng Pilipinas is poised to revise its latest projection for the end-2012 GIR, which was set at a range of only $77.5 billion to $78 billion.
“We will likely review the GIR forecast for the year. Our external payments position continues to benefit from large remittances, rising BPO earnings and strong capital inflows,” BSP Governor Amando Tetangco Jr. told reporters Wednesday.
Tetangco said the country’s usual sources of foreign currencies continued to grow in the past months. As a result, available dollars and other currencies in the local foreign exchange market also grew, giving the BSP the flexibility to purchase more foreign currencies. The BSP took advantage of the foreign exchange liquidity in the market by engaging in heavy dollar buying, which boosted the GIR position, he said.
The central bank had to buy dollars from the market to help stem the rise of the peso. Market players said that if not for the BSP’s foreign-exchange operations, the peso could have been even stronger.
The peso has appreciated by 5.1 percent from the start of the year to July.
Latest BSP data showed that the GIR had hit $76.29 billion as of the end of June.
The amount is enough to cover importation for about 11 months. It is also six times the country’s foreign currency-denominated debts that are falling due in the short term.
Economists said the Philippines had a “very healthy external liquidity.”
Based on international benchmarks, a GIR that can cover at least four months of imports is considered “comfortable level.”
The country’s rising GIR helps boost the country’s credit image in the international financial community.
However, while the BSP’s dollar-buying activities help in increasing the country’s GIR, they also mean jacking up the central bank’s expenses.
Last year, the BSP incurred a net loss of nearly P34 billion due to its foreign-exchange operations.