The country’s gross international reserves (GIR) rose by $641 million to $80.18 billion in January from the revised December 2014 level of $79.54 billion, preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed on Friday.
The increase in reserves resulted from higher net foreign currency deposits by the national government, revaluation adjustments of the central bank’s gold holdings and foreign currency-denominated reserves, and income from its investments abroad.
“These were partially offset by payments, made by the national government for its maturing foreign exchange obligations,” the BSP said in a statement.
Dollar reserves in January were also $824 million higher than the $79.36 billion level recorded a year earlier.
GIR refers to foreign assets that are readily available to and controlled by the central bank for direct financing of payments imbalances. These consist of holdings of gold, special drawing rights, foreign investments, and foreign currency. Higher reserves provide monetary authorities with some flexibility in managing both the exchange rate of the peso and domestic inflation.
Higher import cover
According to the central bank, the latest GIR level provides a buffer of 10.3 months’ worth of imports of goods and payments of services and income, up slightly from the 10.2-month import cover in December.
“It is also equivalent to 8.3 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity,” the BSP said.
Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI) said the GIR increased as the BSP bought up a substantial amount of US dollars in the spot market to defend the P44 per dollar level of the peso.
With this, he expects the country’s dollar reserves to further increase in the coming months as there will be short-term appreciation pressure for the peso.
“The BSP will take this opportunity to load up on the US dollar and limit sharp fluctuations in the exchange rate,” he said.