What it is
The term “Gross International Reserves” (GIR) refer to a country’s foreign exchange holdings, special drawing rights, reserve position in the IMF, and gold at the end of a given period. These are put together and expressed as a US dollar value.
The higher these reserves are, the more resilient and flexible that nation can be when the market is volatile. That’s because the government can choose to dip into the GIR when it needs to help meet the country’s foreign exchange requirements.
Further, in case of rapid depreciation, these reserves can be used to stabilize the national currency.
According to the Bangko Sentral ng Pilipinas (BSP), GIR is enough if it can finance at least 3 months’ worth of the country’s imports of goods and payments of services and primary income.
Another indicator of reserve adequacy is for the GIR amount to cover at least 100% of the country’s payments for foreign liabilities, public and private, falling due within the next 12-month period.
What it means for you
While the country’s GIR probably won’t affect you directly, you may feel its impact during times in which the peso undergoes rapid depreciation. That’s because the central bank can sell some of the dollars in the reserve to stabilize the local currency.
In turn, this helps the economy stay in good shape, which benefits investors and non-investors alike.
After all, economic stability is good for the country and businesses, and so it is likely to be positively reflected in a diverse spread of factors, from market conditions to prices of basic commodities.
