The country’s US dollar stock climbed to its highest level of $111.981 billion as of end-September 2024, surpassing the previous record of $108.794 billion in 2021, as the central bank was accumulating foreign exchange and assets to boost external reserves and defend the local currency.
Based on preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Monday, Oct. 7, the gross international reserves (GIR) increased by 14.13 percent or by $13.865 billion year-on-year compared to $98.116 billion same time in 2023.
The GIR also rose by 3.82 percent or by $4.125 billion versus end-August this year’s reserves of $107.857 billion.
The BSP-monitored GIR are foreign assets of the BSP invested in foreign-issued securities, monetary gold, and foreign exchange.
The latest GIR level is “more than adequate external liquidity buffer” that is equivalent to 8.1 months’ worth of imports of goods and payments of services and primary income. It is also about 6.3 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity, said the BSP.
Basically, a GIR is adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income. This was based on international standards. 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 12-month period.
The reserves were higher in end-September because of the government’s net foreign currency deposits with the BSP that includes proceeds from the issuance of ROP Global Bonds.
The GIR likewise got a boost from the BSP’s gold holdings which had a higher value with the increase in the prices of gold in the global market. The BSP’s net income also increased due to its investments overseas.
Meanwhile, the country’s net international reserves or the NIR, went up by $4.2 billion to $112 billion during the period. The NIR is the difference between the BSP’s reserve assets which is the GIR and reserve liabilities or short-term foreign debt, credit and loans from the International Monetary Fund (IMF).
The GIR is composed of foreign investments, gold, foreign exchange, reserve position in the IMF, and the IMF’s special drawing rights or SDR.
As of end-September, BSP’s foreign investments amounted to $94.515 billion, up from same period last year of $82.988 billion and from end-August this year’s $92.273 billion.
Gold reserves totaled $10.859 billion during the period, higher than same time in 2023 of $9.789 billion and from end-August’s $10.221 billion.
With BSP’s intervention in the spot market, its foreign exchange holdings increased to $2.027 billion versus last year’s $834.4 million and end-August’s $789.5 million.
Meantime, reserve position in the IMF and SDRs stood at $731.1 million and $3.847 billion, respectively, compared to the previous year’s $778.1 million and $3.725 billion.
By the end of 2024, the BSP forecasts GIR will be around $104 billion and about $105 billion next year. In 2023, the GIR improved to $103.753 billion compared to $96.149 billion in 2022.
The BSP is focused on ensuring a stable foreign exchange market and that it has an “unwavering commitment to use the tools at its disposal to stabilize the exchange rate” including its first defense which is the GIR.
As a matter of policy, the BSP’s participation in the exchange rate market is limited to tempering sharp fluctuations in the exchange rate. The BSP also does not target nor avoid any level of the peso and does not alter currency trends. The peso is currently strong at the P56 level vis-a-vis the US dollar.
The GIR is supported by foreign exchange inflows from remittances, earnings from the business process outsourcing sector, and foreign direct investments. Tourism revenues are also a steady source of US dollars for the Philippines.