PH dollar reserves back at $94 B in Oct.

November 9 ------ The Philippines’ US dollar stock recovered back to the $94 billion level in October following the government’s global bond sale last month.

The National Government (NG) deposited part of the $2 billion three-tranched, fixed-rate global bonds it transacted last Oct. 5 to the Bangko Sentral ng Pilipinas (BSP). The fresh US dollar NG deposit contributed to the recovery in the gross international reserves (GIR) after it dropped to $93 billion in September or $4.44 billion lower from August, due to its intervention in the foreign exchange (FX) market to smoothen FX volatility.

The peso depreciated to its record lowest of P59 vis-à-vis the US dollar in September and October. The GIR as of end-October stood at $94.074 billion, up from $93 billion in September. However, compared to same time in 2021, the GIR is down by $13.81 billion from $107.88 billion. The BSP said that the latest GIR level is still considered “more than adequate external liquidity buffer”. The rule of thumb is that a GIR is adequate if it can finance at least three-months’ worth of the country’s imports of goods and payments of services and primary income. At $94 billion, the GIR is equivalent to about 7.5 months’ worth of imports of goods and payments of services and primary income. It is also 6.7 times the country’s short-term external debt based on original maturity, and four times based on residual maturity. “The month-on-month increase in the GIR level reflected mainly the (NG) net foreign currency deposits with the BSP, which include proceeds from its issuance of ROP Global Bonds, and upward valuation adjustments in foreign currency-denominated reserves (or non-gold reserves),” said the BSP. The BSP’s reserve assets consist of foreign investments, gold, FX, reserve position in the International Monetary Fund (IMF), and special drawing rights.

As of end-October, the GIR’s foreign investment component amounted to $80.012 billion, up from September’s $78.708 billion but lower than same period last year of $91.195 billion. The BSP’s gold reserves, meantime, amounted to $8.217 billion from $8.334 billion in September. Last year in October, gold holdings totaled $9.130 billion. The FX component in the GIR totaled $1.447 billion during the period, lower than $1.637 billion in September. On Sept. 16, the BSP revised its GIR projection lower to $99 billion in 2022 from its previous estimate of $105 billion. The BSP may have to revise the GIR forecast again this month after being active in the exchange market in October to avoid “extreme” and substantial changes in the exchange rate. The BSP intervenes in the spot market to strengthen the peso by releasing US dollar liquidity. It withdraws from the country’s FX reserves to temper peso-US dollar volatility.

Since the BSP uses a flexible and free-floating exchange rate policy, it remains market-determined. The BSP therefore does not target a peso level versus the US dollar nor do they announce exchange rate forecasts.

Source: mb.com.ph