Forex reserves rose to $80.7B in June

AFP FILE PHOTO

The country’s foreign exchange reserves rose for the fourth consecutive month in June to $80.7 billion as foreign money in various forms continued to flow into the country, the central bank reported Monday.

Documents released Monday showed the country’s gross international reserves (GIR) rose to their highest level for the year and remained more than ample to protect the country from external crises.

The increase in reserves was due mainly to the revaluation adjustments on the BSP’s gold holdings, net foreign currency deposits by the Bureau of the Treasury, and income from the BSP’s investments abroad.

“These inflows were partially offset by payments for maturing foreign exchange obligations of the national government,” the BSP said in a statement.

At the end of June, the country’s GIR was up by half a billion dollars from the month before. Year-on-year, however, the reserves were still lower than the $81.22 billion in June of 2013.

The country’s reserves, which are held by the central bank, serve as a line of defense for economic shocks that lead to shortages in dollars that the government and businesses need to do business with the rest of the world.

A shortage of foreign exchange would force local businesses and the government to buy dollars from outside at higher prices, which would bring the value of the peso down. A weaker peso makes imported goods more expensive. For the government, it increases the cost of servicing foreign obligations, straining the state’s resources.

The GIR remained enough to cover 11 months’ worth of imports of goods and payments of services and income. This is higher than the international benchmark of three months.  It is also equivalent to 7.7 times the country’s short-term external debt based on original maturity.

Last week, BSP Deputy Governor Diwa C. Guinigundo said the official forecast for the country’s yearend reserves was up for review. He said massive outflow of foreign exchange in the form of investments at the start of the year might result in a more “conservative” forecast.

As it stands, the BSP expects to end the year with as much as a record $88 billion in reserves.