The Philippines Abroad exForeign exchange reserves rose to the highest level in more than two years, mainly due to the increase in the central bank’s income from its foreign investments.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) shows that gross dollar reserves increased 0.18% to $106.92 billion at the end of August from $106.74 billion at the end of July.
“The month-on-month increase in the level of the GIR (gross international reserves) reFmainly used the net income from the BSP’s investments abroad,” the central bank said in a statement.
Year after year, the country’s dollarbu roseFfers rose 7.39% from $99.57 billion in August 2023.
Dollar reserves in August also stood at a 29-month high or since $107.3 billion in March 2022.
At the end of August, the level of dollar reserves was sufficient to cover approximately 6.1 times the country’s short-term external debt based on the original maturity and 3.7 times based on the remaining maturity.
It also corresponded to 7.9 months of imports of goods and payments for services and primary income.
Ample currency buffers protect an economy from market volatility and ensure the country can pay its debts in the event of an economic downturn.
BSP data shows that foreign investment increased 0.33% to $91.41 billion at the end of August, compared to $91.11 billion a month ago, and 8.65% from $84.13 billion in the same month last year.
Gold reserves were valued at $10.22 billion at the end of August, down 0.88% from $10.31 billion in the previous month and down 0.1% from $10.23 billion a year past.
On the other hand, net foreign currency deposits fell 4.4% to $773.4 million from $809 million month on month. However, this increased by 19.98% from $664.6 million a year earlier.
Net international reserves rose 0.19% to $106.9 billion at the end of August, compared to $106.7 billion last month.
The net international reserves are the diFbetween the BSP’s reserves (GIR) and reserve requirements, such as foreign short-term debt and International Monetary Fund (IMF) credits and loans.
The Philippines’ reserve position in the IMF rose 0.83% to $725.9 million at the end of August, from $719.9 million at the end of July. However, this was down 8.16% from $790.4 million a year ago.
Special drawing rights, or the amount the country can tap from the IMF, rose 0.2% to $3.8 billion, up from $3.79 billion last month. It also rose 0.72% from $3.77 billion last year.
“The continued rise in the GIR could be attributed to the continued appreciation of the country’s structural US dollarFlows such as remittances from Filipino workers abroad, BPO (business process outsourcing) revenues, exports, foreign investment (foreign direct investment and foreign portfolios), among others,” said Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp. in a Viber message.
In the FIn the first half, remittances rose 2.9% year-on-year to $16.25 billion.
Hot money produced a net incomeFlow of $1.46 billion in the January-July period, up 830.7% from $157.3 million inFlows in the same period a year ago.
In the January to May period, net foreign direct investment inflows rose 15.8% year-on-year to $4.024 billion.
“In the coming months, the GIR could rise further on the back of proceeds from the national government’s $2.5 billion global bond issuance at the end of August 2024, and the remaining $500 million global bond issuance planned for the remainder of 2024 is programmed,” he said. Ricafort said in a Viber message.
Last month, the government raised $2.5 billion from an offering of global bonds denominated in US dollars in three tranches. In May, $2 billion was raised from global bond issuance.
The government has not yet borrowed $500 million of this year’s total $5 billion borrowing plan.
The BSP expects the GIR level to reach $104 billion by the end of the year. — Beatriz Marie D. Cruz