The Central Bank of the Philippines reported that the country’s foreign exchange reserves climbed sharply in February, hitting their highest level in more than two years amid strong inflows.
CB Governor Amado Tetangco Jr. said the country’s gross international reserves (GIR) reached $81.3 billion in February, up $609 million from $80.69 billion in January and the highest since December 2013.
He attributed the increase to the revaluation adjustments on the Bangko Sentral ng Pilipinas’ (BSP) foreign currency-denominated reserves and gold holdings resulting from the rise in the price of gold in the international market.
Other reasons for the improved reserves were the net foreign currency deposits by the national government and BSP’s income from investments abroad.
“These were partially offset by BSP’s foreign exchange operations and payments made by the national government for its maturing foreign exchange obligations,” Tetangco said.
Data showed the value of the BSP’s gold holdings went up 11 percent to $7.81 billion from $7.04 billion.
The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.
If necessary, the BSP buys dollars from the foreign exchange market to prevent sharp depreciation of the peso. It can also sell to avoid sharp appreciation of the local currency.
Tetangco said the end-February GIR level remains ample as it can cover 10.4 months’ worth of imports of goods and payments of services and income.
He added the GIR level was also equivalent to 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.
The country’s foreign exchange reserves reached $80.67 billion last year from $79.54 billion in 2014. The figure was slightly lower than the revised GIR level target of $80.7 billion for 2015.
For this year, the BSP sees the GIR hitting $82.7 billion equivalent to nine months import cover.
The BSP now expects cash remittances from Filipinos abroad growing by four percent this year.
It also expects the current account surplus of $5.7 billion this year, lower than the projected level of $8.9 billion in 2015 due mainly to the expected large increase in the imports of goods, notwithstanding improvements in the services and secondary income accounts.
Remittances, business process outsourcing revenues and international tourism receipts have offset weak merchandise exports to keep the country’s BoP position in surplus, leading to an increase in foreign reserves in recent years. (SWCA)