Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Wednesday the country's higher reserves position in the International Monetary Fund (IMF) of $2.78 billion in special drawing rights (SDR) will “reduce” the country’s “reliance on debt” which are more costly.

Diokno said all IMF members have been advised to utilize the fresh SDR allocation to “boost foreign exchange (FX) reserves and reduce reliance on debt, create space for countries to step up effort against the crisis and support reforms to the economy.”

All 190 IMF members can exchange their SDRs for hard currencies. “The newly allocated SDRs are reflected in the GIR until the National Government determines its use,” said Diokno.

The BSP has an increased share in the IMF’s reserves allocation of SDR1.958 billion which will be reflected in the country’s FX stock for the month of August.

As of the July gross international reserves (GIR), the Philippines’ IMF reserves amount to SDR856.19 million or $1.22 billion. This will increase to $2.78 billion in the August GIR after the SDR boost.

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

“We confirm that the Philippines’ share in the SDR allocation amounting to SDR1,958,027,771 was credited to the country’s SDR account on August 23, 2021. We expect this to result in an increase in the country’s GIR,” he said.

As of end-July, the GIR level was at $107.15 billion, considered an adequate external liquidity buffer equivalent to 12.2 months’ worth of imports of goods and payments of services and primary income, and about 7.7 times of short-term external debt based on original maturity and 5.2 times based on residual maturity.

The Philippines has an outstanding external debt of $97 billion as of end-March, up by 19.19 percent year-on-year or by $15.63 billion.

The Washington-based IMF’s decision to raise the SDR allocation to $650 billion took effect on August 23 (US time). IMF managing director Kristalina Georgieva in a statement said this was the IMF’s biggest SDR allocation to date, and a “significant shot in the arm for the world (and) if used wisely, a unique opportunity to combat this unprecedented crisis.”

Georgieva said to “magnify the benefits” of the higher SDRs, IMF members with strong external positions should channel some of their SDRs to countries that need more financing.

The Philippines since 2010 is a creditor-member of the IMF after pre-paying its last IMF loans in 2006.

As a creditor and IMF member in its own right, the BSP participates in the IMF’s credit facilities such as the New Arrangements to Borrow (NAB) with a commitment of SDR680 million or $1 billion until 2025.

The BSP also has $1 billion in the IMF Bilateral Borrowing Agreement (BBA) until end-2021 and another $400 million in the Financial Transactions Plan, another credit facility.