‘Just a matter of time’ before BSP reserves top $100B

The Philippines’ foreign exchange reserves will likely top the $100-billion mark soon, according to the chief of the central bank—a situation that will give the country a measure of protection against capital flight previously unseen in its history.

In an text message, Bangko Sentral (BSP) ng Pilipinas Gov. Benjamin Diokno said he was “sure it is just a matter of time” before the tally of gross international reserves (GIR) reach 12 digits after the latest date showed it rising sharply last month.

The central bank said its total dollar holdings, based on preliminary data, rose by $4.53 billion to $98 billion as of end-July 2020 from the end-June 2020 level of $93.47 billion.

The month-on-month increase in the dollar reserves reflected the inflows mainly from the revaluation gains from the BSP’s gold holdings, the national government’s foreign currency deposits with the BSP as well as the central bank’s income from its investments abroad.

These inflows were partly offset, however, by the foreign currency withdrawals made by the government to pay its foreign currency obligations.

The central bank said its end-July 2020 dollar reserve level “represents an ample external liquidity buffer, which can cushion the domestic economy against external shocks.” It was equivalent to 8.9 months’ worth of imports of goods and payments of services and primary income. It was also worth about 7.5 times the country’s short-term external debt based on original maturity and 4.9 times based on residual maturity.

Similarly, the net international reserves—or the difference between the BSP’s gross reserves and total short-term liabilities—increased by $4.52 billion to $97.99 billion as of end-July from the end-June level of $93.47 billion.

Last 30 July, the policy-making Monetary Board reverted to an active strategy in the management of gold reserves. This changed the measurement of gold from Amortized Cost, which was at $1,259.66/FTO (fine troy ounce), to Fair Value, at $1,979.35/FTO as of end-July. This resulted in total revaluation gains of $719.69/FTO or a total of $4.58 billion.

By convention, the level of gross dollar reserves is viewed to be 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 level of dollars is also considered adequate if it provides at least 100-percent cover for the payment of the country’s foreign liabilities, public and private, falling due within the immediate 12-month period.