BSP: PH Dollar Reserves Down 12% in 2022, Remains Sufficient

The Philippines’ gross international reserves (GIR) fell to USD96.01 billion at the end of December 2022, down by 12 percent from USD108.79 billion at the end of 2021, due to US dollar selling.

Despite the drop, the Bangko Sentral ng Pilipinas (BSP), considers the reserves more than sufficient as a buffer as BSP governor Felipe M. Medalla said that the GIR was adequate according to International Monetary Fund (IMF) standards, even being “on the high side”.

The GIR is higher than the BSP’s revised projection of USD93 billion for 2022 and is also higher than the end-November GIR of USD95.12 billion.

The BSP had originally estimated a GIR of USD105 billion for 2022, but this was revised down due to peso depreciation, higher-than-expected local inflation, and large US interest rate hikes last year.

The peso hit its weakest level against the US dollar on 29 September 2022, at PHP59 to USD1, and was the weakest level for the peso since breaking the previous low of PHP56.45 against the US dollar in 2004.

Meanwhile, the GIR fell to a low of USD93 billion at the end of September 2022, with the BSP actively participating in the exchange rate market in an effort to prevent the peso from falling past PHP60 against the strong US dollar.

Despite the decline in reserves, Medalla emphasized the BSP’s commitment to stabilizing the exchange rate and ensuring a stable foreign exchange market as he stated that the BSP plans to become a signatory to the United Nation Principles for Responsible Investment in line with its Sustainable Central Banking strategy, and is also considering the development of a Responsible Investment Charter to guide the integration of sustainability tests with financial assessments.

As part of its sustainability agenda, the BSP has already invested USD550 million in the Green Bond Fund of the Bank for International Settlements, and this investment, which is part of the GIR, may be increased to as much as USD1 billion by 2024. (GFB)