Higher gold prices lift Philippines reserves to $104.81 billion in August

MANILA, Philippines — The country’s foreign exchange buffer rose to a five-month high in August as higher global gold prices lifted the Bangko Sentral ng Pilipinas (BSP)’s gold holdings, helping keep reserves adequate despite government debt payments.

Preliminary data from the BSP showed gross international reserves (GIR) climbed by 1.4 percent to $104.81 billion as of end-August from $103.32 billion in July.

GIR refers to foreign assets held by the central bank, including gold, foreign currency deposits, securities, special drawing rights, reserve position in the fund and other reserve assets.

It is the country’s stock of foreign currency resources that can be used to pay for imports, settle foreign debt and cushion the economy from external shocks.

The end-August GIR was the highest since the $106.64 billion recorded in March. However, it was still lower by 2.1 percent than the $107.1 billion posted in August last year.

“The increase in GIR to a five-month high in August was mainly driven by valuation gains in the BSP’s gold holdings amid higher global gold prices, as well as income from the BSP’s investments abroad,” UnionBank chief economist Ruben Carlo Asuncion said.

These gains were partly offset by the national government’s drawdowns on its foreign currency deposits with the central bank for external debt service. This means the government used part of its foreign currency deposits in the BSP to pay obligations falling due abroad.

By component, gold holdings rose by 9.3 percent to $19.11 billion in August from $17.49 billion a month prior. From a year earlier, gold reserves jumped by 31.6 percent from $14.52 billion.

The latest GIR level can cover up to 6.8 months’ worth of imports of goods and payments for services and primary income. The reserves were also equivalent to about 3.7 times the country’s short-term external debt based on residual maturity.

Short-term external debt based on residual maturity includes debt due within a year, plus principal payments on longer-term loans falling due over the next 12 months.

“Looking ahead, the trajectory of reserves will depend on developments in gold prices, investment earnings, external financing flows and government foreign-currency transactions,” he said.