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Gross international reserves surged to $110B in December

The gross international reserves rose by $5 billion in December to a record $109.8 billion at the end of 2020 from $104.82 billion in November, surpassing the full-year target of $105 billion set by the Bangko Sentral ng Pilipinas.

The reserves were significantly higher than $87.83 billion registered in December 2019, BSP data showed Friday.

BSP Governor Benjamin Diokno said in a statement the month-on-month increase in the reserves’ level reflected inflows mainly from the BSP’s foreign exchange operations, national government’s foreign currency deposits with the BSP representing proceeds from the issuance of ROP global bonds, and revaluation gains from the BSP’s gold holdings amid the increase in the prices of the precious metal in the international market.

“These inflows were partly offset, however, by the national government’s payments of its foreign currency debt obligations,” Diokno said.

He said the latest GIR level represented an adequate external liquidity buffer, which could help cushion the domestic economy against external shocks. The buffer was equivalent to 11.7 months’ worth of imports of goods and payments of services and primary income.

It was also about 9.6 times the country’s short-term external debt based on original maturity and 5.5 times based on residual maturity.

The net international reserves, which refer to the difference between the BSP’s GIR and total short-term liabilities, also increased $5 billion to $109.8 billion as of end-December from the end-November 2020 level of $104.8 billion.

Data showed that the BSP’s gold holdings increased to $11.605 billion in December from $10.747 billion in November 2020.  It was also up from just $8 billion in December 2019.

BSP’s foreign investments, mainly in US treasuries, increased to $93.43 billion in December from $89.28 billion in November and $75.30 billion a year ago.

Other components of the GIR were $2.73 billion in foreign exchange, $1.22 billion in special drawing rights and $812.9 billion in reserve position in the International Monetary Fund.

The BSP earlier raised the GIR level projection for 2020 to $105 billion from the previous estimate of $100 billion.

BSP Deputy Governor Francisco Dakila said in a briefing that in revising upward the GIR target for 2020, the BSP “took into account the revaluation adjustments in gold holdings and the increase in foreign loans of the government amid the ongoing pandemic.”

He said the GIR level was seen to further increase to $106 billion in 2021.

The strong GIR was one of the factors cited by Fitch Ratings in affirming the Philippines’ ‘BBB’ rating with stable outlook.

“The Philippines’ external finances remain a credit strength. Foreign-currency reserves remain high and gross external debt levels are manageable,” the credit rating agency said. 

“We expect reserve coverage of current external payments to remain strong in 2021 and 2022 at about nine to 10 months,” Fitch said. 

Topics: Bangko Sentral ng Pilipinas , Benjamin Diokno , foreign exchange , Francisco Dakila
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