Peru's Net International Reserves (NIR), managed by the
, now total US$100.832 billion as of April 20 this year, resources that allow the Peruvian economy to remain strong in facing external shocks and preserving the sol's stability against the U.S. dollar.
"International reserves are made up of investments in liquid international assets and contribute to the country's economic and financial stability," the issuing entity said in its latest Weekly Economic Report.
According to Central Bank statistics, the NIR surpassed the US$100 billion mark on April 10 this year after reaching US$100.037 billion, when a day earlier on April 9 they stood at US$99.877 billion.
However, from April 15 this year (US$100.076 billion) to April 20 (US$100.832 billion), the upward trend has remained constant.
Composition
As of April 15, the NIR were composed of exchange position (US$67.496 billion), financial system deposits (US$24.633 billion), public sector deposits (US$5.523 billion), and others (US$2.424 billion); these include Special Drawing Rights (SDRs) allocations, Public Treasury Global Bonds, and repurchase operations to provide foreign currency, the issuing entity said.
NIR/GDP ratio
The BCR said the NIR as of April 15 are equivalent to 29% of the country's Gross Domestic Product (GDP), one of the highest ratios in the region.
For example, when Peru's NIR stood at US$98.5 billion on March 18 this year, they represented 28.5% of GDP, a ratio higher than Brazil (16.5%), Colombia (15.1%), Chile (14.1%), and Mexico (14.1%), according to the issuing entity's latest Inflation Report.
A positive effect of the high level of NIR can be seen in the strength of the Peruvian currency, as highlighted by the Central Bank: "The Peruvian sol has remained the most stable currency so far this century, due to its lower inflation and macroeconomic strength."
The NIR increased "exponentially" during the present century, since on Jan. 4, 2000, they amounted to just US$8.555 billion. Now, 25 years and a few months later, they have surpassed US$100 billion.
Why are NIR important?
The Central Reserve Bank explains that NIR contribute to the country's economic and financial stability as "they guarantee the foreign currency availability in unusual situations that might occur due to external shocks resulting in eventual and possible withdrawals of foreign currency deposits and a subsequent capital flight from the financial system."
It also stated that the "adequate availability of foreign exchange reserves helps reduce country risk with the subsequent improvement of the country credit ratings."
This is highly important, as Peruvian companies can access credit abroad under better conditions.
Also, the high level of NIR relative to the country's GDP gives foreign investors confidence in the sound management of the macroeconomy and encourages them to expand in the country.
"International reserves are particularly important in a context of globalization of international markets, reduction of barriers to capital flows and volatility of financial, foreign exchange and metal markets," the BCR emphasized.
(END) MDV/MVB