GIR hits new record high at $99B

Published September 16, 2020, 6:42 PM

by Lee C. Chipongian

Gross international reserves (GIR) climbed to a new record high of $98.954 billion as of end-August, up by $350 million from the previous $98.60 billion end-July, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.

The GIR increased from the BSP’s foreign exchange operations and income from its investments overseas. “These inflows were partly offset, however, by the foreign currency withdrawals made by the National Government (NG) to pay its foreign currency debt obligations and revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market,” said the BSP.

The latest buffer stock is sufficient enough to cover for nine months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 7.6 times of the country’s short-term external debt based on original maturity and 4.8 times based on residual maturity.

“The end-August 2020 GIR level represents a more than adequate external liquidity buffer, which can cushion the domestic economy against external shocks,” said the BSP. “By convention, GIR 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 GIR includes $82.446 billion investments in foreign-issued securities and $12.039 billion gold reserves or as monetary gold.
The BSP’s gold holdings increased from $8 billion to $12.595 billion end-July after it reverted from a passive to an active strategy in the management of gold reserves. The change from amortized cost which was at $1,259.66/fine troy ounces (FTO) to fair value at $1,979.35/FTO resulted in total revaluation gains of $719.69/FTO or a total of $4.58 billion for the BSP.
As foreign assets, the GIR also has foreign exchange reserves of $2.505 billion and claims to the International Monetary Fund as reserve position of $753.7 million and Special Drawing Rights of $1.209 billion.

The BSP has an original GIR estimate for 2020 of $90 billion which was surpassed in April this year. For 2021, the GIR projection is $91 billion. Last year, the country’s dollar stock was at $87.84 billion.

BSP Governor Benjamin E. Diokno said last week that BSP remains confident that the GIR “will remain robust in the coming years as exports, overseas Filipinos’ remittances, and investments rebound amid the gradual reopening of economies here and abroad.”

Diokno said the build-up of reserve assets did not come from just the sustained foreign exchange inflows from remittances but also from business process outsourcing revenues, tourist receipts, direct and portfolio investments.

“The BSP’s foreign exchange operations, consistent with its aim of smoothening the exchange rate volatility, further contributed to the higher GIR level. In addition, the NG has also secured foreign borrowings during the period to partly finance the budget, including responses to the COVID-19 pandemic. It registered net foreign currency receipts of $2.5 billion,” said Diokno in his last “GBED Talks” online chat with the press.

He also added that the GIR as a “contingency buffer in instances of insufficient domestic FX (foreign exchange) supply (for crisis prevention) and fund FX shortages during economic/financial stresses (for crisis mitigation), both firms and households who hold FX assets or those who transact in foreign currencies are assured of ample cushion in case of FX shortfalls if the country’s GIR is at a comfortable level.”