, July 8 , 2004
By Des Ferriols  -  The countryís gross international reserves (GIR) went down by 2.3 percent to $16.159 billion in June on higher foreign exchange outflows due to public sector debt servicing, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Despite the decline, the latest GIR level was still adequate to cover 4.4 months worth of imports of goods and services. In May, the GIR was recorded at $16.422 billion.

The BSP said the latest GIR level was also estimated to be equivalent to 2.3 times the countryís short-term debt based on original maturity and 1.3 times based on residual maturity.

Short-term debt based on residual maturity refers to outstanding short-term external debt on original maturity plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

The BSP expects the GIR to dip to as low as $14 billion this year but government borrowing has been strong early in the year due mostly to the funding requirements of the National Power Corp.

(NPC) which had to be sourced externally.

The decline in the June reserves, according to the BSP, was also due in part to withdrawals by the Napocor of its foreign exchange deposits with the BSP.

Likewise, the BSP said its net international reserves (BSP-NIR) decreased by $381 million to $13.861 billion as of end-June, inclusive of revaluation of reserve assets and reserve-related liabilities.

The BSP said it expected the overall balance of payments to be better than expected by yearend but only because of the anticipated slowdown in imports which means that there would be less need for dollars.

BSP Assistant Governor Diwa Guinigundo said it was still too early to project a number but he said the BSP was reviewing its balance of payments (BPO) projections after getting the initial feedback from export industries.

"I donít want to quote a number yet but it is possible to end up with a smaller BOP deficit this year," Guinigundo said.

Electronic and semiconductor exporters have been warning economic planners that investments were trickling down to a halt, signs that investments may be actually flowing out into China.

Based on exportersí projections, Guinigundo said the BSP was expecting exports to grow by at least 10 percent this year, just from the trickle-down effect of the 25 percent growth in global demand.

"That is a very conservative number," Guinigundo said. "It does not assume any dramatic increase in investments so that if there will be incremental investments, we would expect a corresponding increase in output."

Guinigundo said the BSP was tempering its projections since export performance alone would not work to affect the BOP. "If investments fail to come in and we are servicing imports and debt payments at the same time, it wonít affect the deficit projection," he said.

Guinigundo said the BSP was expecting imports to be a little less than the previous year since there was a notable accumulation of stocks in the third and fourth quarter of 2003.

"This means we will not have to import as much as we would ordinarily need because there is a previous accumulation that we could draw down from," he explained.

Reported by: Sol Jose Vanzi

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