Foreign exchange reserves near $40 billion in July

MANILA, Philippines – The country’s foreign exchange reserves nearly hit the $40 billion level as of end July 2009, boosted by proceeds from the government’s second global bond issue last month and income from the central bank’s investments abroad, the Bangko Sentral ng Pilipinas (BSP) announced yesterday.

The end-July dollar reserves level of $39.99 billion was higher by $496 million from the end-June level of $39.49 billion, BSP officer-in-charge Nestor Espenilla Jr. said.

“The increase in the preliminary end-July 2009 GIR level was due mainly to deposits by the National Government of proceeds from its second global bond issue for the year, valuation gains in the BSP’s gold holdings arising from the higher price of gold in the international market in July 2009, foreign currency by the authorized agent banks as well as income from the BSP’s investments abroad,” he told reporters yesterday.

However, the BSP said these receipts were partly offset by outflows arising from the repayment of maturing foreign exchange obligations of the government and the BSP.

Last July, the government raised $750 million through the issuance of dollar-denominated bonds. Proceeds would be used to finance the government’s swelling budget deficit which hit P153.4 billion as of end-June or more than eight times the P18 billion deficit posted in the same period last year.

For the whole year, the government expects the deficit to hit P250 billion from a previous program of P199.2 billion.

The BSP said the current GIR level could cover 6.9 months of imports of goods and payments of services and income.

The country’s dollar reserves consist of BSP’s gross foreign currency holdings, gold reserves, special drawing rights from multilateral institutions and foreign investments.

It is an indicator of the country’s ability to service the economy’s need for foreign currencies.

“It was also equivalent to 6.3 times the country’s short-term external debt based on original maturity and 3.2 times based on residual maturity,” it said.

Short-term debt based on residual maturity refers to outstanding short-term external debt on original maturity plus principal payments on medium-and-long

term loans of the public and private sectors falling due within the next 12 months.

The level of net international reserves (NIR), which includes revaluation of reserve assets and reserve-related liabilities, increased by $696 million to $39.16 billion as of end-July 2009 from the previous month’s level of $38.47 billion,” the BSP said.

NIR refers to the difference between the BSP’s GIR and total short-term liabilities.

Philstar