By Melissa Luz T. Lopez
Senior Reporter
THE CENTRAL BANK is banking on the peso’s recovery against the greenback to rebuild its foreign exchange reserves, a senior official said.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said monetary authorities are looking to replenish gross international reserves (GIR) which have declined for the most of 2018. “Bit by bit, we will try and build up the reserves without leaning against the wind,” he said in a recent interview.
The country’s reserves dropped to $74.773 billion in October from $74.939 billion in September. That was the lowest level in seven years since July 2011 and marked a second straight month of decline, according to latest central bank data.
The current GIR level remained below the BSP’s $80-billion forecast for the entire year and is less than the $81.57-billion reserves as of December 2017.
The BSP employs “tactical intervention” and uses the reserve stash to intervene and smoothen changes in day-to-day currency trading in order to keep the peso stable.
In terms of import cover, October’s level slipped to 6.8 months versus 7.7 months when the year opened, though still well above the three-month global standard.
The peso has pared its losses over the past month to return to the P52 level versus the greenback, coming from its weakest levels in 12 years back in September. It was 4.8% weaker year-to-date on Monday compared to about eight percent two months ago.
“These last three months of 2018, we will see some turnaround in the peso. More (dollars) are coming in: remittances, BPO (business process outsourcing) payments and more people are coming in from tourism,” Mr. Guinigundo said.
“The accumulation of foreign exchange can see a high point within the last three months and it continues to happen.”
The central bank official also pointed out that more dollars are headed to the Philippines ahead of Christmas, giving BSP more resources to beef up reserves.
“If there are opportunities, we will do so because there is excess supply of dollars in the market especially if doing so will provide additional liquidity to the system,” he added.
“Even if you release a few pesos here and there and build up your GIR, it will not unduly upset the stability of the fundamentals.”
These purchases will likewise help boost peso liquidity in the market, spurring money supply growth after easing in the last few months.
Emilio S. Neri, Jr., lead economist at the Bank of the Philippine Islands, has cited the need for the BSP to “build up” the country’s reserves after the peso’s depreciation eroded this buffer for much of the year.
Credit raters have been citing GIR as a source of strength for the Philippines, providing sufficient buffer against external shocks which could unduly weigh on the country’s ability to service foreign obligations.

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