GIR level drops slightly to $104.82 B end-March

The central bank reported Friday (April 16) that the level of gross international reserves (GIR) was 0.32 percent lower at the end of the first quarter (end-March) to $104.820 billion from $105.161 billion in February.

Compared to same period in 2020 of $88.861 billion, GIR was up 18 percent or by $15.959 billion.

“The latest GIR level represents a more than adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the Bangko Sentral ng Pilipinas (BSP) continue to say, as always for every GIR announcement. “This buffer is equivalent to 12 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7.5 times the country’s shortterm external debt based on original maturity and 5.3 times based on residual maturity,” said the BSP.

For the end-March period, GIR declined because of outflows from the net withdrawal in the National Government’s foreign currency deposits – “which were largely used for debt servicing, and a downward adjustment in the value of BSP’s gold holdings due to the decrease in the price of gold in the international market,” said the BSP.

The BSP’s income from its overseas investments partly offset NG withdrawals to pay for maturing obligations.

At the end of the first quarter, BSP’s foreign investments amounted to $89.994 billion, down from the previous month’s $90.679 billion. It was however much more than same time last year of $76.480 billion.

Gold reserves are stable at $9.113 billion from $9.170 billion in February. The end-March 2020 gold holdings was lower at $8.015 billion. The BSP’s gold hoard only started rising when it changed the way it calculates gold holdings last July from a passive to an active strategy in its management.

In a footnote, the BSP explained that a GIR is considered adequate when it’s enough to finance at least three-months’ worth of imports of goods and payments of services and primary income. It is also 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 twelve-month period, the BSP added.

The GIR is composed of foreign assets of the BSP invested in foreign-issued securities, monetary gold, and foreign exchange.

The BSP is projecting GIR to climb by as much as $114 billion by end-2021 and $117 billion by 2022.