SDRs boost GIR to $108 B in August

With almost $4 billion in Special Drawing Rights (SDR) in the International Monetary Fund (IMF), the country’s foreign exchange stock increased to $108.046 billion at the end of August, up by 9.18 percent or $9.092 billion compared to same period in 2020 of $98.954 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

The latest but preliminary gross international reserves (GIR) is higher than end-July’s $107.151 billion by $895 million, and already includes the Philippines’ additional $2.773 billion IMF SDR. It is the main reason for the higher GIR. The BSP’s reserve position in the IMF is $797 million in August, slightly lower than $799 million in July.

As of end-August, the SDR component of the GIR amounts to $3.996 billion from the previous $1.223 billion (end-July). The fresh SDR reserves are available for the BSP and the government utilization when needed.

BSP Governor Benjamin E. Diokno said last August 25 that the newly allocated SDRs will be reflected in the GIR “until the National Government determines its use.” He also said that the SDR allocation will not only boost GIR but also reduce the government’s reliance on foreign debt for financing COVID-19 crisis response.

The BSP in a statement Monday said the current GIR is “more than adequate external liquidity buffer” and is 12.3 months’ worth of imports of goods and payments of services and primary income and about 7.8 times the country’s short-term external debt on original maturity and 5.4 times on residual maturity.

As of end-August, the BSP-managed foreign investments as part of GIR has dropped to $90.679 billion compared to the previous month’s $92.652 billion, while gold reserves totaled $9.155 billion from $9.148 billion end-July.

The highest GIR was reported in January this year of $108.673 billion. The final GIR numbers will be reported at the end of this month, with the balance of payments report.

All 190 IMF members have been advised to utilize the fresh SDR allocation to increase FX reserves and to cut on debt, according to Diokno. The Philippines has an outstanding external debt of $97 billion as of end-March.

He said the BSP supports the IMF SDR allocation which will provide additional liquidity to member countries particularly during the pandemic “as efforts are exerted to address the COVID-19 crisis.”

The IMF has raised the SDR allocation to $650 billion last month as a “significant shot in the arm for the world” to combat the pandemic. “The distribution of SDR allocations on August 23, 2021 was proportional to the IMF members' existing quotas in the Fund,” said the BSP.