Foreign exchange reserves topped $100b in September

The country’s gross international reserves exceeded the $100-billion mark for the first time on record, providing the economy sufficient buffers against external shocks amid the health crisis, data from the Bangko Sentral ng Pilipinas showed Thursday.

BSP Governor Benjamin Diokno said the GIR increased by $1.54 billion on a monthly basis to hit an all-time high of $100.49 billion as of end-September from $98.95 billion in August.

“The month-on-month increase in the GIR level reflected inflows mainly from the BSP’s foreign exchange operations and national government’s foreign currency deposits with the BSP,” Diokno said.

“These inflows were partly offset, however, by the revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market and foreign currency withdrawals made by the national government to pay its foreign currency debt obligations,” he said.

Diokno said the end-September 2020 GIR level represented more than adequate external liquidity buffer to cushion the domestic economy against external shocks.

The buffer is equivalent to 10 months’ worth of imports of goods and payments of services and primary income. It is also about 9.2 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

Data showed the GIR jumped by $14.91 billion, or 17.4 percent year-on-year, from $85.58 billion in September 2019.

The GIR consisted of $84.4 billion in foreign investments, $11.59 billion in gold holdings, $2.53 billion in foreign exchange, $1.2 billion in special drawing rights and $747.9 million in reserve position in the International Monetary Fund.

Meanwhile, the net international reserves, which refers to the difference between the BSP’s GIR and total short-term liabilities, increased by $1.53 billion to $100.48 billion as of end-September 2020 from $98.95 billion in August.

Diokno said in a previous briefing that the GIR could settle at more than $100 billion by yearend. He said if the price of gold went up significantly, it would gradually increase the reserves. Gold holdings accounted for 12.8 percent of the country’s reserves.

He 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.

Diokno 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.

He said the price of gold had improved from $1,400 per ounce to around $2,000 an ounce.

Data showed that the country’s GIR steadily rose over the past four decades from just $3.2 billion in 1980 to more than $100 billion this year.

The international reserves 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.

The BSP expects GIR to increase further to $102 billion next year.

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