New SDRs from IMF to boost Philippines’ reserves
THE PROVISION of special drawing rights (SDRs) worth $2.8 billion from the International Monetary Fund (IMF) will boost the country’s dollar buffers amid the crisis, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.
“The BSP supports the IMF SDR allocation which will provide additional liquidity to member countries particularly during this period as efforts are exerted to address the coronavirus disease 2019 crisis,” Mr. Diokno said in a Viber message.
Mr. Diokno on Tuesday night confirmed that 1.958 billion SDRs were credited to the country’s SDR account on Aug. 23, Monday. This is equivalent to about $2.777 billion, based on a social media post by the IMF Asia and Pacific.
“We expect this to result in an increase in the country’s gross international reserves (GIR),” the central bank chief said.
“The newly allocated SDRs are reflected in the GIR until the National Government determines its use,” Mr. Diokno added.
IMF member countries are provided with SDRs — the fund’s unit of exchange backed by dollars, euros, yen, sterling and yuan — in proportion to their quota shares in the IMF. The SDR valuation is calculated daily and was at $1.41974 as of Aug. 24, based on the IMF website.
Mr. Diokno said the IMF allows its member countries to tap on their SDR allocation “to boost foreign exchange reserves and reduce reliance on debt, create space for countries to step up effort against the crisis and support reforms to the economy.”
“IMF member countries can exchange their SDRs for hard currencies with other IMF members,” he said.
As of end-July, the country’s foreign exchange buffers stood at $107.2 billion, where $1.221 billion was in the form of SDRs.
At its end-July level, the country’s GIR is equivalent to 12.1 months of imports. It can also cover about 7.7 times the country’s short-term foreign debt based on original maturity and 5.1 times the short-term external debt based on residual maturity.
The country’s GIR reached an all-time high of $110.117 billion at end-2020. The BSP expects this to climb to $115 billion by end-2021.
The Institute of International Finance on Wednesday said the amounts of fresh SDRs allocated to IMF member countries are “too modest” to make a difference, but will likely be useful for a few markets that are facing external funding challenges.
“All in all, the SDR allocation is irrelevant for the global outlook but matters for small countries in distress,” it said in a note. — LWTN
