Forex reserves up to $80.86B in end-May

The country’s foreign exchange reserves rose slightly to reach a nine-month high at the end of May as the central bank absorbed excess dollars from the market, data showed.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s gross international reserves (GIR) rose to $80.86 billion as of the end of May 2015, compared to the end-April GIR of $80.85 billion. This was the highest level since August of last year.

The increase in reserves was due mainly to the BSP’s foreign exchange operations, revaluation adjustments on its gold holdings and income from its investments abroad, the BSP said.

“These were partially offset by the national government’s net foreign currency withdrawals and payments for its maturing foreign exchange obligations as well as revaluation adjustments on the BSP’s foreign currency-denominated reserves,” the BSP said in a statement.

Dollar reserves stand as the country’s last line of defense from external shocks. Robust reserves ensures the country does not run out of foreign exchange that it can use to pay for imported goods and services, or maturing obligations.

Reserves remained ample as it could cover 10.6 months’ worth of imports of goods and payments of services and income. It is also equivalent to 4.9 times the country’s external debt that matures in a year or less.

When more dollars enter the country than needed, the BSP is able to build up its reserves by buying up currencies from the market. Inversely, reserves are reduced when not enough dollars enter the economy, forcing the BSP to release part of its holdings to keep businesses from buying dollars from overseas.

The BSP expects the Philippines to end the year with about $81.6 billion in dollar reserves. This will come on the back of an expected balance-of-payments (BOP) surplus of about $2 billion, which would be better than last year’s deficit of $2.9 billion.

The BOP position is a summary of all transactions between the Philippines and the rest of the world.