Forex reserves hit record high $86.4 billion

MANILA, Philippines —  The Bangko Sentral ng Pilipinas (BSP) continued to beef up the country’s foreign exchange buffer with the gross international reserves (GIR) hitting

a record high of $86.39 billion in November.

BSP Governor Benjamin Diokno said in a text message that the GIR level rose by $560 million to hit $86.39 billion in November from $85.83 billion in October.

This eclipsed the previous record high of $86.14billion in September 2016.

The GIR is the sum of all foreign exchange flowing into the country. It serves as buffer to ensure that the Philippines will 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.

The BSP has been building up the country’s foreign exchange buffer to help the country survive external shocks. It uses the buffer to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso.

In a separate statement, the BSP said the month-on-month increase reflects the inflows arising from the central bank’s foreign exchange operations and income from its investments abroad as well as the national government’s net foreign currency deposits.

“The end-November level of GIR serves as an ample external liquidity buffer,” Diokno said.

Diokno said the buffer is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.

The latest figure, the BSP chief said, is also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

Strong inflows continued to beef up the GIR from sustained remittances, robust receipts from business process outsourcing and tourism as well as steady foreign investment inflows.

The BSP has raised the projected GIR level to $83 billion this year as it expects strong inflows of foreign portfolio investments as well as foreign direct investments.

The country’s foreign exchange buffer narrowed by close to three percent to $79.19 billion in 2018 from $81.57 billion after authorities allowed the peso to depreciate to support the growing economy.

The peso emerged as one of the worst performing currency in th eregion, shedding 5.3 percent to 52.58 to $1 in 2018 from 49.93 to $1 in 2017. After strengthening back to the 50 to $1 level, it continues to flirt with the 52 to $1 level due to the trade war between the US and China as well as the sharp depreciation of the Chinese yuan.

The BSP has since recovered back to the 50 to $1 level due to positive developments in the trade negotiations between the US and China. It gained 3.5 centavos yesterday to close at 50.765 to $1 from Thursday’s 50.8 to $1.