GROSS international reserves (GIR) climbed for the seventh straight month in May, the central bank said on Friday.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the GIR level stood at $85.02 billion in May, 1.3% up from the $83.88 billion logged in April, and 7.3% up from the $79.202 billion recorded in May 2018.

This is the highest reserve level since October 2016 when the GIR stood at $85.106 billion.

“The month-on-month increase in the GIR level was due mainly to inflows arising from the National Government’s (NG) net foreign currency deposits, BSP’s foreign exchange operations and income from investments abroad, and revaluation gains from the BSP’s gold holdings, resulting from the increase in the price of gold in the international market,” the BSP said in a statement on Friday.

“However, the increase in reserves was tempered partially by payments made by the NG for servicing its foreign exchange obligations,” it added.

The BSP’s foreign investments generated $72.149 billion in May, rising 0.4% from $71.847 billion in April and $63.92 billion in May 2018. This accounted for bulk of the reserves.

Meanwhile, the country’s foreign currency stash increased to $2.837 billion last month from $2.201 billion in April. However, the May figure was still 48% lower than the $5.460 billion recorded in May 2018. A stronger peso usually means losses for the BSP, while a weaker peso pads the GIR.

The central bank uses the reserve money to temper sharp swings in the exchange rate.

The BSP’s gold holdings stood at $8.332 billion in May, up 2.5% from $8.124 billion in April, and up 1.6% from $8.197 billion in the same month last year, reflecting improved gold valuations in the international market.

Reserves maintained under the International Monetary Fund (IMF) dropped 0.6% to $520.8 billion in May from $524.3 billion in April. Special drawing rights — or the amount which the Philippines can tap under the IMF’s reserve currency basket inched up 0.08% to $1.183 billion from April’s $1.182 billion.

The end-May GIR settled well above the BSP’s $77 billion projection for the year and the end-2018 level of $79.193 billion.

The current level, which the BSP said “serves as an ample liquidity buffer” can cover up to 7.5 months’ worth of import duties and is equivalent to 5.1 times of the country’s short-term external debt based on original maturity, and 3.6 times based on residual maturity.

International reserves are composed of gold, the BSP’s assets held in foreign currencies, country quotas with the IMF, and foreign currency deposits held by government and state agencies.

It is a key measure of a country’s macroeconomic footing, as it stands as the country’s buffer versus external financial shocks. International debt watchers have cited the Philippines’ ample reserves as a credit strength. — R.J.N.Ignacio

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