Why is building foreign exchange reserves important for countries like the Philippines?
Answer (1)
Foreign exchange reserves are a country’s savings in foreign currencies, usually U.S. dollars, stored by the central bank. These reserves help protect the economy during times of crisis—like when investors pull out money or when the country needs to pay for imported goods like oil or medicine. If the Philippine peso weakens, the Bangko Sentral ng Pilipinas (BSP) can use these reserves to support the currency and keep prices stable. It also gives confidence to foreign investors that the country can meet its international financial obligations. Having strong reserves is like having an emergency fund for the nation.
