Foreign reserves hit $36.6b

PHILIPPINE NEWS SERVICE — The gross international reserves of the Bangko Sentral ng Pilipinas rose to a new all-time high of $36.6 billion at the end of May despite the central bank’s sale of dollars in the spot currency market.

The central bank in a statement yesterday attributed the rise in foreign reserves from $36.4 billion at the end of April to proceeds from the privatization of a power plant by Power Sector Assets and Liabilities Management Corp. and the bank’s income from abroad.

The reserves consisting mainly of dollars, gold, investments overseas and other foreign currencies serve as gauge for investors and creditors on an economy’s ability to pay for its imports or service its debt. The end-May reserves were enough to pay for more than six months’ worth of imports and over thrice its short-term debt.

The central bank’s reserves are placed mainly in foreign investments amounting to $32.2 billion. Some $3.795 billion are in gold and $455.66 million in foreign exchange.

The central bank also has foreign exchange swap agreements with commercial banks that are not reflected in the international reserves.

The swaps refer to the dollars that the central bank lends to banks in exchange for pesos for a specified period of time. The central bank gets its dollars back when the swaps mature, with the banks receiving the equivalent amount in pesos.

The central bank used the swaps last year to sterilize the huge amount of dollars coming into the country from investments and remittances.

It unwound over $2 billion of its foreign currency swap agreements with banks in April to increase the supply of dollars in the market and stabilize the peso.

Central bank data show that foreign exchange swaps fell to $9.03 billion at the end of April, $2.3 billion less than the level at the end of March. Some $2.9 billion of the central bank’s swaps matured in April while another $3.8 billion were unwound in May.

The dollars that the central bank puts in the swaps are not included in the official reserves. The Monetary Board, however, capped the amount of central bank swaps at a little over $13 billion in May from an earlier ceiling of $10 billion.

Including swaps, the central bank’s dollar holdings would easily run up to $45 billion.

The central bank, aside from the heavy use of the swaps last year, expanded its special deposit account facility to mop up excess liquidity coming from investments and remittances of migrant Filipino workers.