Dollar reserves rise to the highest level in two years

By means of Luisa Maria Jacinta C. Jocson, News reporter

THE PHILIPPINES have seen it Dollar reserves are rising to the highest level in more than two years, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Gross international reserves (GIR) rose 1.8% to $104.48 billion at the end of May, from $102.65 billion at the end of April.

This was also 3.9% higher than the $100.59 billion in the same period a year ago.

Dollar reserves were also at the highest level in 25 months or since the $105.4 billion recorded in April 2022.

“The month-on-month increase in the GIR level mainly reflected the net foreign currency deposits of the National Government (NG) with the BSP, including proceeds from the issuance of global bonds of the Republic of the Philippines (ROP), and the net income from the BSP’s investments abroad,” the BSP said.

Ample currency buffers protect the country from market volatility and ensure the country’s ability to service its debts in the event of an economic downturn.

The level of dollar reserves at the end of May is sufficient to cover approximately 5.9 times the country’s short-term foreign debt based on the original maturity and 3.6 times based on the remaining maturity.

It also corresponds to 7.7 months of imports of goods and payments for services and primary income.

The value of the central bank’s gold stock fell 2.3% to $10.02 billion at the end of May, compared with $10.26 billion a month ago. It also fell 1.8% from $10.21 billion in the same period in 2023.

BSP data shows that foreign investment reached $89.02 billion, up 2.2% from $87.13 billion at the end of April and 5% higher than the $84.76 billion a year earlier.

Meanwhile, net international reserves rose 1.8% to $104.46 billion at the end of May, from $102.59 billion at the end of April.

Net international reserves refer to the difference between the BSP’s reserves (GIR) and reserve requirements, including short-term foreign debt, and International Monetary Fund (IMF) credits and loans.

The BSP’s reserves also include foreign investments, foreign exchange, IMF reserve positions and special drawing rights (SDR).

Reserves at the IMF rose 0.15% to $737.2 million at the end of May, compared with $736.1 million a month earlier, but fell 7.5% from $797.2 million in the same month a year ago.

SDRs – or the amount the Philippines can tap from the IMF’s basket of reserve currencies – rose 0.2% to $3.749 billion at the end of May, up from $3.741 billion the month before, and rose 0.13% to $3.753 billion by 2023.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the increase in dollar reserves was due to higher foreign investment and foreign exchange holdings due to the government’s recent issuance of dollar bonds.

The Philippines raised $2 billion in May from issuing double-tranche fixed-rate dollar bonds Ffirst global bond sale of the year.

John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., said the rise in the GIR may be due to positive valuation adjustments in the value of the BSP’s gold holdings.

“The price of gold on the world market has risen in recent months. It is also an indication of BSP’s net income from foreign investments. This could also be due to foreign currency inflows from other instruments,” he said in a Viber message.

Mr Ricafort said GIR levels could improve further in the coming months.

“The country’s GIR could still be supported by continued growth in the country’s structural inflows from remittances from overseas Filipino workers, revenue from business process outsourcing, exports (although offset by imports) (and) a relatively quick recovery of foreign tourism revenue,” he said. .

The BSP expects a GIR level of $103 billion for this year.