FX reserves thin but buffer to external shocks sufficient

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THE COUNTRY’s buffer to external financial shocks remained sufficient despite thinning by end-March to its lowest monthly level in more than three years as the government dipped into gross international reserves (GIR) to pay foreign debt and temper exchange rate fluctuations, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

GIR fell for the third straight month to $80.128 billion in March — from $80.432 billion in February, $81.224 billion in January and from December 2017’s $81.57 billion — “due mainly to outflows arising from the foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations”, the central bank said in a statement.

It was the lowest level since December 2014’s $79.541 billion.

The peso averaged P52.0676 against the greenback last month, weaker than February’s P51.7856 average.

March outflows were partially offset by the national government’s net foreign currency deposits — which include some 1.46 billion renminbi, or about $230 million, in proceeds from the country’s maiden “panda” bond sale last month — and revaluation of the central bank’s gold holdings due to rising prices of the precious metal in the international market.

Income from the central bank’s foreign investments — the biggest GIR segment — grew to $64.615 billion from $64.185 billion in February, even as it fell from $67.677 billion in March last year.

Value of the BSP’s gold holdings — the second-biggest GIR component — edged up to $8.375 billion from February’s $8.308 billion and the year-ago $7.888 billion.

The third-biggest GIR segment, foreign exchange, fell to $5.481 billion from February’s $6.284 billion even as it was 46.76% more than March 2017’s $3.735 billion.

Philippine special drawing rights with the International Monetary Fund (IMF) — which supplements the country’s official reserves and can be exchanged for US dollars, euro, yen, pound or renminbi — steadied at $1.227 billion but increased from the year-ago $1.149 billion.

Finally, Philippine reserves with the IMF edged up to $429.8 million from February’s $428.2 million but was down from March 2017’s $445.7 million.

Despite thinned foreign exchange reserves, the central bank noted that the end-March GIR level provided “ample external liquidity buffer” since they provided 7.8 months worth of import cover, more than double a three-month global standard, and were equivalent to 5.6 times outstanding external debt falling due within 12 months and 4.1 times outstanding foreign debt falling due within a year plus principal payments on medium- and long-term loans of the public and private sectors falling due within 12 months. — EJCT