Philippines – Bangko Sentral ng Pilipinas or BSP’s chief, Governor Felipe M. Medalla, expects the PH Forex reserves to stay over $90 billion until next year after projecting a healthy GIR or Gross International Reserves. On another note, other Forex reserves decline after debt servicing.
BSP doesn’t anticipate the country’s dollar reserves to drop under $90 billion this year up to next year, regardless of the active US dollar exchange. According to Governor Felipe M. Medalla, the chief BSP stated that they still projected a healthy GIR or Gross International Reserves. The question was about the FX reserves decreasing to $80 billion because of spot market intrusions.
The GIR at the end of October sat at $94.1 billion, while in September, it was at $93. The funds got replenished after the deposit of proceeds from the international bond issuance in the same month.
The BSP originally expected a GIR worth $105 billion for this year before the peso depreciation because of the inflation, which was higher than expected and the high-interest rate hike by the United States or the US. The BSP revised the GIR forecast by mid-September, setting it to $99 billion this year and $100 billion for next year. However, BSP still needs to announce its latest projections.
GIR is adequate if it can finance a three-month worth of the country’s imports, where payments of services, imports of goods, and initial income are the sources of this import. It’s a rule of thumb. The GIR is equivalent to around 7.5 months, worth $94 billion. It’s 6.7 times the short-term external liability of the country based on initial maturity and four times as per residual maturity.
The reserve assets of BSP include gold, Forex, reserve position, foreign investments in the IMF or the International Monetary Fund, and special drawing rights.
In a November 28 Article IV Consultation, concluding a report with the economic officials of the Philippines, the IMF stated that in a disturbing market where the FX liquidity is tighter, the FX market intervention of a central bank could calm markets and improve pressures off monetary policy.
The FX intrusions would lead to lower Forex reserves. Monetary authorities conduct FX intervention to influence Forex rates by selling and buying currencies in the Forex market. Forex intervention is for containing excessive variations in FX rates, stabilizing these differences.
The US dollar stock of the BSP has dropped since April 2022. The GIR declined under $100 billion in July from $108.79 billion at the end of December 2021. This year’s lowest level is at $93 billion in September as the peso dropped to P59.00 on September 26, listing the lowest record since 2004, which was P56.45.