INFLOW from foreign transactions expanded the gross international reserves (GIR) to a record high in September, boosted by the national government’s net foreign currency deposits and the central bank’s foreign exchange operations and income from investments abroad.
Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed the gross GIR reached a record $85.9 billion in September, compared with $85.79 billion in August.
The September GIR was also 6.9 percent wider than the $80.31 billion a year earlier.
The GIR is the sum of a country’s foreign transactions, composed of the reserve position in the International Monetary Fund, foreign exchange holdings, gold reserves, and special drawing rights (SDRs) and foreign investments.
The BSP noted the growth was in fact hindered by “payments made by the national government for maturing obligations and the revaluation adjustments on the central bank’s gold holdings as a result of a decrease in gold prices in the international market.
The latest GIR level is enough to cover 10 months worth of merchandise imports and payments of services and income.
It is also equivalent to six times the country’s short-term external debt due with a one year, and 4.3 times based on residual maturity.
Net international reserves—which refer to the difference between the BSP’s GIR and total short term liabilities—increased at $85.89 billion from $85.78 billion.
Emilio Neri Jr., vice president and lead economist at the Bank of the Philippine Islands (BPI), noted the GIR is expected to shrink moving forward as the BSP is inclined to sell its dollars reserves to keep volatility in the peso-dollar market in check.
“What’s gonna happen to the GIR of the BSP? Part of it could be sold to the market. For example, we saw 48 to 50 peso to a dollar exchange. There was a 4 percent depreciation of the peso in September. There was a loss of reserves for the BSP because more funds are going out than coming in on a net basis, and the BSP has to intervene by selling dollars in the market to stabilize the peso,” Neri said.
“If the BSP has not intervened, we are already at the P50 level. But because they are around to sell dollars to smoothen the fluctuations, then that will cushion the impact of the net foreign selling. There are more fund outflows than inflows,” he added.