THE COUNTRY’S dollar reserves inched up in February, driven by inflows from the government’s net foreign currency deposits and the central bank’s foreign exchange operations.
The healthy level of GIR in February will provide some cushion for the economy amid worries over the prolonged spread of the coronavirus disease (COVID-19), according to analysts.
Gross international reserves (GIR) as of end-February stood at $87.606 billion, higher compared to the January level of $86.868 billion as well as the $82.78 billion traced in the same month of 2019, according to preliminary data released by the Bangko Sentral ng Pilipinas on Friday.
At this level, the GIR is beyond the $86-billion target GIR set by the central bank for 2020.
“The month-on-month increase in the GIR level reflected inflows arising from the National Government’s (NG) net foreign currency deposits and BSP’s net foreign exchange operations. These inflows were partly offset, however, by payments made by the NG for servicing its foreign currency debt obligations,” the central bank said.
The GIR level in February can cover 7.7 months’ worth of imports of goods and services and payments of primary income.
Likewise, the GIR level is equal to 5.4 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity, the BSP added.
According to preliminary data, the central bank’s gold reserves, which is included in the country’s dollar buffer, was steady at $8.015 billion for the ninth straight month since June 2019. It was however lower compared to the $8.359 billion traced in end-February 2019.
Meanwhile, gains from foreign investments stood at $75.375 billion, surpassing the $74.364 billion seen in the previous month and the $70.37 billion posted in the comparable year ago period.
On the other hand, reserve position placed with the International Monetary Fund (IMF) dipped to $586.4 billion from the $587.9 billion seen as of end-January, but still higher than the $472.4 billion traced as of end-February 2019.
Foreign currency deposits also slipped to $2.451 billion from the $2.723 billion level seen in the prior month. However, it was still bigger than the $2.388 billion seen a year ago.
Meanwhile. special drawing rights — or the amount which the Philippines can tap from the IMF’s reserve currency basket — inched up to $1.178 billion from the $1.176 billion as of end-January, but was lower compared to the $1.191 billion in end-February 2019.
The country’s net international reserves — which refers to the difference between the BSP’s GIR and total short-term liabilities — also rose by $740 million to $87.6 billion from the end-January level of $86.86 billion.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that that the sustained increase in GIR bodes well for the peso’s resilience amid market volatilities due to global uncertainties.
“The consistent increase in GIR in recent months to sustain among record highs may have fundamentally provided a comfortable cushion on the peso exchange rate, considered resilient compared to other Asian currencies in recent weeks amid some increased volatility in the global financial markets,” he said in an e-mail.
Mr. Ricafort attributed the higher GIR to the rise in dollar inflows, thanks to remittances, and revenues from business process outsourcing, the Philippine Offshore Gaming Operators, tourism revenues, as well as foreign investments.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the current GIR levels will provide a safety net for the economy amid risks from the prolonged spread of the COVID-19 virus.
“A high GIR affords the Philippine economy a bigger space to protect the peso from any potential currency shock because of the health scare,” he said in an e-mail.
“These reserves are meant to fight off the negative perceptions against the value of the peso amidst the onslaught of uncertainties due to the coronavirus scare,” he added. — Luz Wendy T. Noble