GIR as of end-2021 falls below BSP projection

THE COUNTRY’S dollar reserves inched up as of end-December buoyed by higher valuation of gold buffers, but fell short of the central bank’s year-end projection.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed the gross international reserves (GIR) stood at $108.891 billion as of end-December. This is 1.08% up from the $107.723 billion as of end-November but was lower by 1.11% from the record $110.117-billion level seen as of end-2020.

The GIR also fell below the $111-billion end-2021 projection given by the BSP.

“The month-on-month increase in the GIR level reflected mainly the National Government’s net foreign currency deposits with the BSP and upward adjustment in the value of the BSP’s gold holdings due to the increase in the price of gold in the international market,” the BSP said in a statement

At its end-December level, the GIR is enough to cover 10.3 months’ worth of imports of goods and payments of services and primary income.

It is also equivalent to about 8.8 times the country’s short-term external debt based on original maturity and 5.9 times based on residual maturity.

The seasonal increase in remittances sent by overseas Filipinos during the holiday season drove the GIR to its highest level in 12 months or since December 2020, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The end-December GIR level also reflects the 3% increase in world gold prices during the month, he added.

“Despite stark depreciation pressure on the local currency throughout the year, the central bank has managed to maintain a very decent stash of ammunition to stave off any speculative attack on the currency,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

The peso closed at P50.999 a dollar on Dec. 31, 2021, weaker by 6.2% from its P48.023 finish on Dec. 29, 2020.

Having an ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability for debt repayment in the event of an economic downturn.

The BSP earlier said that they expect lower GIR than previously anticipated amid the “use of reserves to pay foreign currency obligations and various expenditures.”

As of end-December, reserves in the form of foreign investments edged up 0.26% to $91.748 billion from $91.505 billion as of end-November. This was 2% down from the $93.644 billion seen a year ago.

The country’s gold reserves were valued at $9.332 billion as of end-2021, higher by 3.7% than the $9 billion a month earlier but falling by 19.6% from the $11.605 billion as of end-2020.

The Philippines’ reserve position in the International Monetary Fund (IMF) increased by 2.5% month on month to $801.6 million, but fell by 1.4% from the $813.1 million from a year ago. 

Special drawing rights held by the Philippines — or the amount the country can tap from the IMF — stood at $3.942 billion for the third straight month and jumped more than three times (219%) the $1.232 billion seen as of end-2020.

Meanwhile, foreign currency deposits stood at $3.066 billion, increasing 23% month on month and by 8.7% year on year.

Asian Institute of Management economist John Paolo R. Rivera said any restriction measures would impact the country’s foreign exchange buffers.

“GIR tends to improve when restrictions are stricter because we do not get to unload our foreign currency reserves as our economy has lower domestic demand and is more reliant on domestic production,” Mr. Rivera said in an e-mail.

For his part, ING’s Mr. Mapa said developments related to tightening of the monetary policy in the US could affect GIR developments this year. Federal Reserve officials have already signaled possible rate hikes this year to curb elevated inflation in the United States. — Luz Wendy T. Noble