Forex reserves build up to record high $86.16 B

The country’s foreign exchange buffer reached a record high of $86.16 billion in September as the Bangko Sentral ng Pilipinas continues to build up the gross international reserves (GIR), according to BSP Governor Benjamin Diokno.

Based on BSP figures, the GIR level last month was $130 million higher than the $86.03 billion recorded as of end-August, reflecting the government’s foreign currency deposits and the central bank’s income from its investments abroad.

However, Diokno said the increase in reserves was partially tempered by payments made by the national government for servicing its foreign exchange obligations.

The latest reserves level was the highest for the GIR, erasing the previous all-time high of $86.14 billion booked in September 2016.

The GIR is the sum of all foreign exchange flowing into the country. It serves as buffer to ensure that the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.

“The end-September level of GIR serves as an ample external liquidity buffer,” Diokno said.

According to the BSP chief, the forex buffer is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

Diokno said the level is also equivalent to 5.4 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.

Strong inflows continued to beef up the GIR from sustained remittances, robust receipts from business process outsourcing and tourism, as well as steady foreign investment inflows.

The BSP has raised the projected GIR level to $83 billion this year as it expects strong inflows of foreign portfolio investments as well as foreign direct investments.

The country’s foreign exchange bufAquino fer narrowed by close to three percent to $79.19 billion in 2018 from $81.57 billion after monetary authorities allowed the peso to depreciate to support the growing economy.

The peso emerged as one of the worst performing currency in the region, shedding 5.3 percent to 52.58 to $1 in 2018 from 49.93 to $1 in 2017. After strengthening back to the 50 to $1 level, it continues to flirt within the 52 to $1 level due to the trade war between the US and China as well as the sharp depreciation of the Chinese yuan.

The peso yesterday shed 13 centavos to close at 51.86 to $1 from Friday’s 51.73 to $1. Trading volume was lower at $828.6 million from $1.12 billion last Friday.