The country’s US dollar stock rose to a six-month high of $101.091 billion as of end-October, partly due to National Government (NG) deposits of fresh funds from the sale of retail dollar bonds last month.
The end-October preliminary gross international reserves (GIR) reflected a 3.03 percent increase from end-September’s $98.116 billion, based on Bangko Sentral ng Pilipinas (BSP) data. It is also more than end-October 2022's $94.027 billion.
The last time GIR stood above $100 billion was in May this year and at $101.76 billion in April.
The BSP attributed the month-on-month increase in the GIR level to the NG’s net foreign currency deposits with the BSP including the $1.2 billion proceeds from its issuance of retail onshore dollar bonds 2 or RDB2.
The higher valuation of BSP’s gold holdings because of the increase in the price of gold in the global market contributed to the GIR. Also, BSP’s net foreign exchange operations and net income from its investments abroad added to the reserves as well.
At current level, the central bank said the GIR is “more than adequate external liquidity buffer” equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.
It is also sufficient to cover about 5.9 times of the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.
Basically, the BSP considers a GIR as 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 is also viewed as more than sufficient 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, said the BSP.
The BSP’s reserve assets are composed of gold, foreign investments, foreign exchange, reserve position in the International Monetary Fund (IMF), and special drawing rights or SDRs in the IMF.
As of end-October, the BSP’s gold reserves amounted to $10.570 billion, up from $9.789 billion in the previous month. The current gold stock is also higher from the same period last year of $8.271 billion.
BSP’s foreign investments mainly in securities and bonds totaled $84.788 billion during the period, up from end-September’s $82.988 billion and from same period in 2022 of $79.963 billion.
The amount of foreign exchange held by BSP as recorded in the GIR, meanwhile, amounted to $1.228 billion as of end-October, up from $834 million in the previous month but lower than same period last year of $1.433 billion.
The BSP’s reserve position in the IMF totaled $777 million from $778 million previously and $739 million in 2022. SDR holdings remain at $3.725 billion for both October and September this year.
In 2022, GIR closed the year at $99.149 billion. This was significantly lower compared to $108.794 billion at the end of 2021, the highest GIR level on record, so far.
The BSP would have been able to sustain the rise in GIR level last year, if it were not for Russia's war on Ukraine which affected the supply and prices of both oil and non-oil commodities, global inflation and interest rates, and especially the exchange the rate volatility.
Last year, the peso depreciated to its lowest record of P59 versus the US dollar. The BSP aggressively defended the local currency and unleashed some $15 billion from the GIR to ease pressures off from the exchange rate.
BSP Governor Eli M. Remolona Jr. is confident the country has enough US dollar reserves to buck global shocks or spillovers and even a US recession. He has been saying this since August this year.
For 2023, the BSP expects GIR will end at a conservative number of $99.5 billion but will improve in 2024 to $102 billion.