By Luz Wendy T. Noble, Reporter

The country’s dollar reserves rose to a fresh record as of end-July, backed by higher gold buffers amid a recent increase in world prices, the Philippine central bank said on Friday.

Gross international reserves (GIR) rose by 15% from a year earlier to $98 billion as of last month, data from the Bangko Sentral ng Pilipinas (BSP) showed. It also rose by 4.8% from May.

A strong reserve buffer protects financial markets from volatility and assures investors and debt watchers that the country can pay its debt even after the economy entered into a recession last quarter.

“The month-on-month increase in the GIR level reflected inflows mainly from the revaluation gains from the BSP’s gold holdings, the National Government’s foreign currency deposits with the BSP as well as BSP’s income from investments abroad,” the central bank said in a statement.

Foreign currency withdrawals made by the National Government to pay its foreign debt offset the growth in the dollar buffers.

At end-July reserve level was already more than the central bank’s $90-billion projection for this year.

It was equivalent to 8.9 months worth of imports of goods and payment of services and primary income. It was about 7.5 times the short-term external debt of the country based on original maturity and 4.9 times based on residual maturity.

The gold reserve component jumped by 57% year on year to $12.595 billion after having steadied at $8.02 billion since June last year.

Gains from investments abroad, which made up the bulk of the reserves, rose by a tenth to $80.72 billion but slid by $171 million from end-June.

Foreign currency deposits rose 5% to $2.76 billion from July 2019 and by $101 million from a month ago.

The significant increase in the gold reserves came “largely due to revaluation as world gold prices sharply increased to new record highs recently,” said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

He said the continued increase in the dollar reserves would continue to support the peso, which had strengthened to the P48 a dollar level.

The peso closed at P48.765 on Friday, appreciating by 7.5 centavos from Thursday and by 27.6 centavos from P49.041 on Aug. 7.

“Record high GIR could strengthen the country’s external position, which in turn, fundamentally supports the country’s favorable credit ratings seen recently,” Mr. Ricafort said.

The Philippines entered into a recession last quarter after the economy shrank by 16.5%.

Economic managers have said the country was unlikely to get a rating downgrade because it continues to have “strong macroeconomic fundamentals.”

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