The level of the Philippines’ gross international reserves (GIR) recovered after months of declines as they rose slightly to $79.96 billion in May, central bank data shows.
The Bangko Sentral ng Pilipinas (BSP) said on Friday that GIR during the month increased by $113 million from the revised $79.84 billion in April.
However, the May GIR level was still slightly more than $1 billion lower than the year-earlier figure of $81 billion. The central bank forecasts GIR to reach $88 billion by the end of 2014.
The increase in dollar reserves was due mainly to the foreign exchange operations of the central bank and the foreign currency deposits of the Treasurer of the Philippines, the BSP said.
These inflows were partially offset by revaluation adjustments on the BSP’s gold holdings and by payments by the government of its maturing foreign exchange obligations.
“The GIR remains ample as it can cover 11.1 months’ worth of imports of goods and payments of services and income. The GIR level is also equivalent to 6.8 times the country’s short-term external debt based on original maturity and 4.8 times based on residual maturity,” BSP Officer-in-Charge Vicente Aquino said.
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.
Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, said that the recent increase in GIR follows a month of strong peso values, allowing the central bank to shore up its reserves.
Mapa said that the Philippines continue to have one of the most comfortable external positions in the region, and the robust GIR will be a boon for the country amid the anticipated Fed interest rate hike cycle in the coming months.
“Given that we plan to import a bevy of capital goods for reconstruction efforts, the ample supply of foreign exchange will help the BSP keep the currency pair stable,” he added.