Forex reserves surpass $100-B mark

The country’s foreign exchange buffer hit a new all-time high of $100.49 billion as of end-September, helping cushion the economy against external shocks such as the COVID-19 pandemic, the Bangko Sentral ng Pilipinas ( BSP) said yesterday.

BSP Governor Benjamin Diokno said the $ 1.54 billion increase in the gross international reserves in September from the August level of $98.95 billion reflected inflows mainly from the BSP’s foreign exchange operations, as well as the national government’s foreign currency deposits with the central bank.

Diokno said the strong inflows were partly offset by the revaluation losses from the BSP’s gold holdings due to the decrease in the price of gold in the international market and foreign currency withdrawals made by the national government to pay its foreign obligations.

“The end-September GIR level represents a more than adequate external liquidity buffer, which can cushion the domestic economy against external shocks,” the BSP chief said.

Diokno said the buffer is equivalent to 10 months’ worth of imports of goods and payments of services and primary income as well as also about 9.2 times the country’s shortterm external debt based on original maturity and 5.4 times based on residual maturity.

Data showed the value of the BSP’s gold holdings tumbled by 3.8 percent to $11.59 billion in September from $12.04 billion in August due to the decline in the price of gold in the world market. The amount, however, was 45 percent higher than last year’s $8.01 billion.

The Monetary Board has decided to shift to active gold trading instead of being passive because of the change in the price dynamics of gold. The price of gold topped $2,000 an ounce to reach new record levels, but has since corrected.

Gold accounts for 11.5 percent of the country’s foreign exchange buffer and the BSP is looking at maintaining it at 10 percent.

The GIR is the sum of all foreign exchange flowing into the country and serves as buffer to ensure that it will not run out of foreign exchange that it could use in case of external shocks.

The BSP has been building up its GIR to serve as buffer against external shocks.

Like most central banks, it holds international reserves to provide a standby supply of foreign exchange for instances when foreign exchange holdings of domestic commercial banks temporarily fall short of the total demand from the private sector and the national government.