RP'S GROSS INTERNATIONAL RESERVES (GIR) HITS ALL-TIME HIGH AS OF AUGUST
MANILA, SEPTEMBER 8, 2007 (STAR) Des Ferriols - The country’s gross international reserves (GIR) reached an all-time high of $30.3 billion as of end-August 2007, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
The record-high reserve level was reached even with massive outflows of portfolio investments in the wake of the global selloff that happened in the second and third week of August.
Data from the BSP show that the end-August level was $2.3 billion higher than the end-July level of $28 billion due to foreign investment inflow and remittances from overseas Filipino workers (OFWs).
The BSP said the sustained foreign exchange inflows enabled the BSP to build up its reserves level while servicing its debt and those of the National Government.
According to BSP Governor Amando M. Tetangco Jr., receipts of income from investments abroad also contributed to the increase in the GIR level.
“In terms of reserve adequacy, the current GIR level can cover 5.6 months of imports of goods and payments of services and income,” Tetangco said.
“This level is also equivalent to 5.9 times the country’s short-term external debt based on original maturity and 3.2 times based on residual maturity,” he added.
The end-August GIR is already higher than the full-year projection of the BSP which upgraded its 2007 estimates, adding that the country’s reserves would ultimately surpass the projected medium term level of $25 billion to $30 billion.
Tetangco had projected that over the medium term, the country’s GIR could go up to as high as $30 billion over the next five years, providing ample cushion against market volatility that threaten vulnerable emerging economies.
However, Tetangco said that since the GIR was already hitting this level this early, there is a possibility that reserves could surpass the $30 billion mark.
Tetangco said the projection is consistent with the expected expansion in foreign exchange requirements of an expanding economy with brisk exports and steady inflow from OFWs.
According to Tetangco the build-up of the reserves over the medium term would support the expansion of the economy.
“The bigger the economy, the higher the reserves that we have to build up,” he said. “When you are on an expansion path, building that up would just be the natural result of economic expansion if it is well-grounded on strong fundamentals.”
The BSP said earlier that although it is also costly to hold on to high reserve levels, a higher foreign exchange stock would provide an even bigger safety net against market volatility.
“The accumulation of reserves is a form of insurance against factors that are largely unexpected,” said the BSP. “Since our fundamentals are good at this point, having ample reserves would give us enough cushion and we have tended to avoid further depreciation of our currency.”
Chief News Editor: Sol Jose Vanzi
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