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Bangko Sentral expects GIR to exceed $100b by yearend

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday he expects the gross international reserves to top $100 billion by yearend, taking into account the surging price of gold in the world market.

“The short answer is yes…, ” Diokno said in a virtual press briefing, when asked on the possibility of the reserves going beyond the $100-billion mark, a record high.

“If the price [of gold] goes up significantly, then it will gradually increase the reserves,” Diokno said.

He said gold holdings account for 12.8 percent of the GIR while the rest is composed of cash.

Diokno said on Monday the BSP would actively engage in gold trading to seize the opportunity presented by the increasing price of the precious metal in the global market.

He said the shift to active gold trading—from passive trading previously done before he became BSP governor—would be good to manage the international reserves.

He said the price of gold climbed from around $1.400 per FTO (fine troy ounce) to around $2,000/FTO. He said a new law also made BSP gold purchases from small miners more attractive.

“The Bangko Sentral ng Pilipinas expects the gross international reserves to remain robust in the near term with exports, remittances and investments rebounding amid the gradual opening of business sectors across the globe,” Diokno said in the briefing.

Data from the BSP showed that from $$3.2 billion in 1980, the GIR rose steadily over the last 40 years to reach an all-time high of $98.6 billion in July this year.

The July figure is equivalent to 8.9 months’ worth of imports of goods and payments of services and primary income. It is also about 7.6 times the country’s short-term external debt based on original maturity and 4.9 times based on residual maturity.

Among the factors that contributed to the rise of GIR are higher revaluation gains on BSP gold holdings from rising gold and bond prices; BSP’s foreign exchange operations; and the national government’s foreign currency deposits with the BSP from its borrowings to finance funding requirements, including for COVID-19 response.

The BSP said the latest GIR continued to represent an ample liquidity buffer that protects the domestic economy against external headwinds such as the global financial crisis and the COVID-19 pandemic.

“The GIR level also improves the country’s creditworthiness and provides confidence as an additional buffer against external economic and financial shocks amid an uncertain global economic environment,” Diokno said.

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

The strong balance of payments surplus, on the back of remittance inflows and exports, allows the BSP and the banks to increase their dollar hoard. It also supports the value of the peso which gained more than 4 percent against the US dollar since the start of the year.

Topics: Bangko Sentral ng Pilipinas , BSP Governor Benjamin Diokno , gross international reserves
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