The Philippines ended 2008 with a record $37.1 billion in foreign reserves, the central bank reported Wednesday, despite a large outflow of foreign portfolio investments amid a food price crisis earlier in the year and a global financial turbulence that led to the peso’s decline.

The central bank, Bangko Sentral ng Pilipinas (BSP), said the country’s gross international reserves (GIR) increased by $300 million from end-2007. It added that a seasonal surge in foreign exchange remittances in December from Filipinos abroad raised the yearend total an end-November level of $35.3 billion.

It said the 2008 increase in the GIR was fueled by inflows from its foreign exchange operations, earnings from its investments abroad, and by proceeds of the government’s foreign borrowings.

The GIR, a key indicator of a country’s ability to cover the foreign exchange requirements of its economy, consists of the central bank’s gross foreign currency holdings, gold reserves, foreign investments and Special Drawing Rights from the International Monetary Fund.

"Revaluation gains in the BSP’s gold account holdings on account of the increase in the price of gold in the international market during the year also contributed to the higher yearend level," the central bank said in a statement.

Despite a sharp decline in commodity prices that started in August because of the slowing global economy, gold prices have firmed up, as the precious metal, like cash and US Treasuries, is usually considered by risk-averse investors to be a safe haven in times of uncertainty.

The BSP holdings of gold at yearend were valued at $4.36 billion, compared with $3.54 billion at end-2007.

About 88 per cent of the GIR is in US dollars, eight per cent in euros, 2.3 per cent in yen, and the remainder in other currencies.

The yearend GIR can cover 5.6 months’ worth of imports of goods and payments of service and income, the central bank said. It is also equivalent to 4.5 times the country’s short-term external debt based on original maturity, and 2.8 times based on residual maturity.

Short-term debt based on residual maturity refers to the sum of short term external debt and medium- and long-term loan repayments falling due within the next 12 months.

The GIR would have been higher had the peso sustained its two-year rally. Last year, the central bank became a heavy seller of US dollars to temper the local currency’s sharp depreciation.

In 2008, the peso depreciated by 13 per cent against the US dollar. -ANN