MANILA, PHILIPPINES: The central bank of Philippines, Bangko Sentral ng Pilipinas (BSP), built up its foreign currency reserves to a new high of $36.1 billion as of end-February, up $1.3 billion from January, given strong inflows, including proceeds of the national government’s latest global bond float.

Including another $13 billion worth of foreign exchange currently locked up in foreign currency swaps not yet booked as part of the gross international reserves (GIR), the BSP’s effective war chest is nearing the $50-billion mark.

The GIR of $36.1 billion could cover 6.3 months’ worth of imports of goods and payment of services and income, BSP Governor Amando Tetangco Jr. said Friday (7 Mar).

The GIR—a key indicator of a country’s ability to cover the foreign exchange requirements of its economy and consists of the central bank’s gross foreign currency holdings, gold reserves, foreign investments and Special Drawing Rights from the International Monetary Fund—stood at $34.8 billion as of end-January.

“The significant increase in reserves was attributed mainly to the national government’s deposit of proceeds from the reopening of its global bonds as well as the Bangko Sentral’s net foreign exchange operations and income from its investments abroad,” Tetangco said.

The national government recently raised $500 million from the reopening of offshore bonds maturing in 2032, taking advantage of the change in credit outlook to “positive” from “stable” by US-based credit watchdog Moody’s.

The BSP has also increased purchases of dollars on the foreign exchange open market, given sustained inflows of overseas Filipino workers’ remittances and foreign portfolio investments flowing to local stocks and bonds.

In January, the BSP reduced its benchmark borrowing rate by only 25 basis points, barely matching the 150-basis point cut by the US Federal Reserve, effectively making peso-denominated bonds more attractive to foreign funds. From Feb. 1 to 22, the Philippines recorded a net foreign portfolio investment of about $81 million, reversing a net outflow of $236.96 million in January.

Earlier this week, lawmakers have urged the BSP to curb its ballooning foreign exchange losses by diversifying its GIR, 88% of which is in US dollars.

According to a recent report to Congress, about 8% of the GIR is in euro, 2.3% in yen and the remainder in small currencies. About $4 billion is in the form of gold reserves.

Over the past two years, foreign exchange swaps have also become a major tool used by the BSP to mop up excess foreign exchange purchased from the Philippine Dealing System. (By DORIS DUMLAO/ Philippine Daily Inquirer/ ANN)