Hefty reserves to shield Philippines from US Fed actions: BSP


Posted at Jul 12 2021 01:03 PM

Hefty reserves to shield Philippines from US Fed actions: BSP 1
Bangko Sentral ng Pilipinas’ (BSP) new governer, Benjamin Diokno at work shortly after an interview with Cathy Yang for ANC’s The Boss, held at the BSP headquarters in Manila on March 12, 2019. George Calvelo, ABS-CBN News/File

MANILA - An interest rate hike by the US Federal Reserve might put a lot of pressure on other emerging economies but not the Philippines due to its hefty dollar reserves and other foreign exchange sources, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday.

The BSP earlier said the country's $107.25 billion gross international reserves in May is "more than adequate" as an external liquidity buffer, equivalent to 12.2 months of imports of goods and payments of services and primary income.

Business Process Outsourcing also continues to help buoy the economy despite the COVID-19 pandemic as the industry quickly adopted flexible work arrangements.

"We have hefty gross international reserves and we have multiple sources of foreign exchange coming in. We have OFW remittance, BPO receipts, foreign direct investment continue to come in. So I’m not worried of the Fed’s interest rates going up," Diokno told ANC. 

"That [US Fed rate hike] will cause a lot of problems for other emerging economies but not for the Philippines. That’s true for other emerging economies with huge debt-to-GDP ratios and so they will be under a lot of pressure in that kind of situation," he added.

Diokno said the country's debt-to-GDP ratio is at 60 percent which is still a "sustainable" borrowing level.

When asked whether or not there could be an adjustment in key policy rate in the next 6 months, Diokno said "there will be a strong second half of the year. Let’s see from there whether we will make some adjustments for our policy."

The BSP has kept the policy rate at its lowest level of 2 percent to support the economy. 

On the Philippines' inclusion in the global dirty money watchdog Financial Action Task Force' gray list or jurisdictions under increased monitoring, Diokno said he is confident the country could meet the 2023 deadline for assigned mitigating measures.

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