By Luisa Maria Jacinta C. Jocson, Correspondent
THE dollar reserves of the Philippines increased to $106.65 billion as of the end of February, as reported by the Bangko Sentral ng Pilipinas (BSP).
Initial figures from the central bank indicated that gross international reserves (GIR) climbed by 3.3% month over month from $103.27 billion at the end of January.
This was also 4.6% greater than the $101.99 billion recorded during the same time last year.
The dollar reserves marked the highest level in three months or since the $108.49 billion achieved in November.
Substantial foreign exchange reserves safeguard the nation from market fluctuations and ensure its ability to meet debt obligations in the event of an economic downturn.
“The month-on-month rise in the GIR level was primarily driven by the National Government’s (NG) net foreign currency deposits with the BSP, which encompass proceeds from the issuance of Republic of the Philippines global bonds,” stated the central bank.
In January, the NG garnered $3.3 billion from the sale of 10-year and 25-year fixed-rate global bonds, along with seven-year euro sustainability bonds. This was NG’s inaugural global bond sale for the year.
BSP data revealed that as of the end of February, the level of dollar reserves is sufficient to cover approximately 3.8 times the nation’s short-term external debt based on residual maturity.
It also equates to 7.5 months’ worth of goods imports and payments for services and primary income.
The increase in dollar reserves was attributed to the “upward valuation adjustments in the BSP’s gold assets driven by the rise in gold prices in the global market, alongside net earnings from the BSP’s investments overseas.”
The value of the central bank’s gold assets rose by 2.5% to $12.5 billion at the end of February from $11.75 billion a month prior. It also surged by 16.6% compared to $10.34 billion during the same time frame in 2024.
Foreign investments amounted to $89.41 billion as of the end of February, reflecting a 3.5% increase from $86.37 billion at the end of January and a 3.4% rise from $86.45 billion a year earlier.
Meanwhile, net international reserves rose by 3.3% to $106.6 billion from $103.2 billion as of the close of January.
Net international reserves denote the difference between the BSP’s reserve assets (GIR) and reserve liabilities, which include short-term foreign debt and credits and loans from the International Monetary Fund (IMF).
The BSP’s reserve assets also encompass foreign investments, foreign currency, reserve positions in the IMF, and special drawing rights (SDR).
Reserves with the IMF declined by 0.2% to $670.2 million as of the end of February from $671.3 million the previous month. It also fell by 10.9% from $752.5 million a year prior.
SDRs — referring to the amount the Philippines can access from the IMF’s currency reserve pool — increased slightly by 0.2% to $3.74 billion from $3.73 billion last month. On a year-over-year basis, it dipped by 1.1% to $3.78 billion.
“The rise in GIR signifies robust external buffers, essential for protecting the economy against external disruptions,” remarked John Paolo R. Rivera, Senior Research Fellow at the Philippine Institute for Development Studies.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort stated that the growth in GIR was attributed to the NG’s recent global bond issuance and ongoing increases in gold holdings.
“Gold holdings have continued to thrive, largely reflecting the 2.1% monthly rise in global gold prices, which recently reached record highs partly due to a flight to safety toward gold amid current global market instability,” he explained.
Mr. Ricafort also acknowledged the uptick in foreign investments concurrent with rises in US Treasuries’ prices in February.
“The benchmark 10-year US Treasury yield recently slipped to 4.3%, marking one of the lowest levels in three months,” he added.
Looking ahead, Mr. Ricafort noted that the GIR may be bolstered by sustained growth in remittances from overseas Filipino workers (OFW), revenues from business process outsourcing (BPO), exports, and a quick recovery in foreign tourism earnings.
“Remittances from OFWs are anticipated to remain resilient, supporting reserves. BPO and tourism are also expected to generate foreign currency inflows that could strengthen GIR,” Mr. Rivera indicated.
Oikonomia Advisory and Research, Inc. economist Reinielle Matt M. Erece likewise suggested that the GIR will be propelled by “robust OFW remittances, foreign investments, a weak peso, and trade diversification.”
The BSP forecasts a GIR level of $110 billion for this year.
Mr. Rivera remarked that the central bank’s outlook for dollar reserves this year is achievable, albeit contingent upon the BSP’s actions in the FX market.
“A depreciating peso may lead to elevated import costs, thereby increasing demand for the US dollar which could exert pressure on reserves. However, a weaker peso may also advantage dollar-earning sectors, which could mitigate some risks,” said Mr. Rivera.
“An increased import bill driven by infrastructure projects and rising oil prices could expand the deficit, necessitating the BSP to utilize reserves to stabilize the peso,” he added.
The peso closed at P57.206 per dollar on Friday, appreciating by 11.4 centavos from its P57.32 finish on Thursday. This was the peso’s most favorable close in nearly five months, since it closed at P57.205 per dollar on October 11, 2024.
“A weak peso is not inherently unfavorable, as it enhances the competitiveness of exports in global markets. Higher exports imply increased dollar inflows,” noted Mr. Erece.
“Additionally, the ongoing trade conflicts among major producers can present an opportunity for the Philippines to serve as an alternative trading partner for other nations.”
