Forex reserves hit record high in July

THE country's foreign reserves hit a fresh record high in July as the value of the central bank's foreign holdings rose, initial data from the Bangko Sentral ng Pilipinas (BSP) showed.

Gross international reserves (GIR) stood at $85.492 billion for the month, up from the $85.284 billion tallied in June and the $80.332 billion a year ago. This also marks the highest level of reserves to date.

In a statement, the BSP said higher yields from its foreign exchange operations and income from offshore investments added to the country's import cover to grow by 6.4%. Higher gold prices in the international market also pushed higher the value of the central bank's gold holdings.

"These were partially offset by payments made by the national government for its maturing foreign exchange obligations," the BSP said.

The GIR is the measure of a country's capacity to pay import dues and service foreign debt. This year, the BSP expects total reserves to reach $82.7 billion, well above the $80.667 billion logged at end-2015.

Nearly all of the reserve components grew in July from a year ago.

The central bank's foreign investments, which composes the bulk of the reserves, grew by 2.9% to $73.323 billion from last year's $71.224 billion, data showed.

Meanwhile, the BSP's foreign exchange holdings more than tripled to reach $2.032 billion from $623 million previously.

The BSP sometimes participates in the foreign exchange market by purchasing more dollars to temper any sharp movements in the peso, as part of its open market operations.

The value of the central bank's gold reserves also rose by nearly a fourth to $8.505 billion from $6.864 billion last year. This was also higher than the $8.336 billion posted in June.

BSP reserves lodged with the International Monetary Fund (IMF) also inched up to $447.8 million from $441.1 million previously.

Meanwhile, special drawing rights (SDRs) -- or the claims to the "freely usable currencies" under the IMF's reserve basket -- stood steady at $1.184 billion.

International reserves are made up of gold, central bank assets held in various foreign currencies, country quotas with the IMF, and foreign exchange deposits of government and state-run firms. It is considered as among the basis for the Philippines' sound macroeconomic footing.

The current GIR level can cover up to 10.5 months' worth of the country's imports of goods and services, the BSP said. The amount also stands equal to six times the country's short-term offshore debt based on original maturity, and 4.3 times in terms of residual maturity.

Source: Business World Online