Dollar reserves rise for 7th straight month

Foreign currency inflows pushed the Philippines dollar reserves higher in May, marking its seventh straight month of increases, the central bank said on Friday—a development that bodes well for the strength of the peso and industries that buy raw and intermediate materials from abroad.

In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said preliminary data showed that the country’s gross international reserves rose to $85.02 billion as of end-May 2019 from $83.96 billion as of end-April 2019.

“The month-on-month increase in the dollar reserve level was due mainly to inflows arising from the government’s net foreign currency deposits, BSP’s foreign exchange operations and income from its investments abroad,” he said.

The hike was aided by revaluation gains from the BSP’s gold holdings, as gold prices rose in the international market. However, the increase in reserves was tempered by payments made by the government for the servicing of its foreign exchange obligations.

Diokno said the end-May 2019 dollar reserve level “serves as an ample external liquidity buffer” and is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

It is also equivalent to 5.1 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

Net international reserves—which refers to the difference between the BSP’s gross reserves and total short-term liabilities—likewise rose by $1.14 billion to $85 billion as of end-May 2019 from the end-April 2019 level of $83.94 billion.

At its lowest level in October last year, the country’s dollar reserves dipped to $74.7 billion, reversing only after the BSP completed its aggressive string of anti-inflation interest rate hikes.