The country’s gross international reserves climbed to a record $99 billion as of end-August 2020, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Wednesday.
Preliminary data from the BSP showed that the GIR increased by $350 million to settle at $98.95 billion as of end-August 2020 from the revised $98.6 billion in July.
“The month-on-month increase in the GIR level reflected inflows mainly from the BSP’s foreign exchange operations and income from its investments abroad. These inflows were partly offset, however, by the foreign currency withdrawals made by the National Government 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,” Diokno said in a statement.
Diokno said the end-August 2020 GIR level represented a more than adequate external liquidity buffer, which could cushion the domestic economy against external shocks.
This buffer is equivalent to 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 4.8 times based on residual maturity.
The net international reserves, which refer to the difference between the GIR and total short-term liabilities, increased $354 million to $98.95billion as of end-August from the end-July level of US$98.59 billion.
Diokno earlier said GIR could exceed $100 billion by yearend, taking into account the surging price of gold in the world market.
He said that if the price of gold went up significantly, it would gradually increase the total reserves. Gold holdings accounted for 12.8 percent of the country’s GIR.
Diokno said 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 country’s international reserves.
“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.
The Philippines’ GIR rose steadily during the last 40 years from $3.2 billion in 1980. The BSP holds international reserves to provide a standby supply of foreign exchange for instances when FX holdings of domestic commercial banks temporarily fall short of the total demand from the private sector and the national government.