By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) expects to shore up its foreign exchange reserves in the last quarter of the year as they see less import requirements that drain the currency stock.

BSP Deputy Governor Diwa C. Guinigundo, currently the governor-in-charge, said that while accumulating US dollars is challenging at the moment when the peso is depreciating, they will be looking for opportunistic windows beginning in October.

Foreign exchange reserves held by the central bank declined to a seven-year low of $75.16 billion as of end-September this year, $2.77 billion down from the previous month’s $77.93 billion because of outflows and gold price adjustments. Compared to same time last year, gross international reserves (GIR) was $5.8 billion lower.

The last time the GIR, BSP’s shock absorber, was at the $75-billion level was in 2011.

Guinigundo said the combination of fewer imports and heavier remittance inflows in the last three months of the year should allow the peso – which has fallen almost nine percent year-to-date to P54.40 last week – to regain lost ground.

He expects the peso to stabilize starting this month, October, supported by the higher inflows beginning next month to December. “(We) expect the peso to stabilize with some upward bias,” he added.

As soon as the peso shows signs of strength, the BSP will consider this an opportunistic period to start accumulating reserves again – “but not to the extent of reversing the market fundamentals,” said Guinigundo.

Import requirements will also slow down during this time since no one imports in the last quarter of a year. Both private and public sector shipments will continue in the following year. “My point is we can do that (build up the GIR again) in an opportunistic way. If there is excess supply of foreign exchange in the market, by all means we have the flexibility, and the scope, to start building our reserves again,” said Guinigundo.

The GIR declines as the peso weakens. However, the BSP has repeatedly assured the financial market that the dollar stock remains adequate in addressing foreign exchange requirements and in managing exchange rate volatility.

The decreasing GIR level only means that the stability of the exchange rate is at the cost of drawing down the country’s reserves, which is sufficient.

“The GIR and the exchange rate – should always be stable,” said Guinigundo. As such, as stated by the BSP, they can use reserve levels to intervene in volatile exchange rate fluctuations.

The GIR as of end-September this year is still “ample external liquidity buffer.”

At $75.16 billion, the GIR is equivalent to 6.8 months’ worth of imports of goods and payments of services and primary income and about 5.9 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.

The factors for decreased GIR were outflows from the BSP’s foreign exchange operations and National Government withdrawals to pay for maturing foreign exchange loans.

The revaluation adjustments on the BSP’s gold holdings resulting from the decrease in the price of gold in the international market was also a factor to the lower GIR level. “However, the decline in the GIR level was partially tempered by the (government’s) net foreign currency deposits,” said Guinigundo.

As of end-September, the BSP’s foreign investments amounted to $59.96 billion from $61.77 billion in August. It was also lower than same time last year of $65.37 billion. Gold holdings also fell to $7.57 billion from the previous month’s $7.62 billion and from end-September 2017’s $8 billion.

In 2017, GIR stood at $81.57 billion. The BSP expects a lower GIR of $80 billion for this year.