The country’s gross international reserves (GIR) stood at $80.7 billion at the end of June, up from a revised $80.2 billion in May, and should be enough to cover 11 months’ worth of imports of goods and payments of services, the central bank said on Monday.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that GIR in June increased by $486 million from May but was lower by $497 million compared to the year-earlier figure of $81.3 billion.
The central bank forecasts GIR to reach $88 billion by the end of 2014. According to the central bank, the increase in dollar reserves was due mainly to the revaluation of the BSP’s gold holdings, net foreign currency deposits of the Treasurer of the Philippines, and the central bank’s income from its investments abroad.
The inflows were partially offset by payments by the government of its maturing foreign exchange obligations, the BSP added.
“The GIR remains ample as it can cover 11 months’ worth of imports of goods and payments of services and income. It is also equivalent to 7.7 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity,” the monetary authority stated.
GIR refers to foreign assets that are readily available to and controlled by the central bank for direct financing of payments imbalances. It consists of holdings of gold, special drawing rights, foreign investments, and foreign exchange. Higher reserves provide monetary authorities with some flexibility in managing both the exchange rate of the peso and domestic inflation.
Justino Calaycay, analyst at Accord Capital Equities Corp., said the country’s dollar reserves remain at a comfortable level.
“I think that equates to over 11 months of imports. I don’t think it poses any major threat to the overall economic picture. We’ve survived scenarios with less in our GIR,” Calaycay said in a text message to The Manila Times.
Meanwhile, University of Asia and the Pacific economist Dr. Victor Abola shared the same view, saying the country’s external position, as measured by its international reserves, is still very strong. Abola recently projected that GIR for full-year 2014 may settle at $85 billion.
“Although we cannot be complacent even though the reserves are high. Nobody is rich enough. I would apply the same for our dollar reserves. It’s never too much,” he said.