MANILA, March 20, 2006
 (MANILA TIMES) By Maricel E. Burgonio, Reporter - FOREIGN investments in shares of publicly listed Philippine companies, government IOUs and other peso-denominated financial instruments declined after the Arroyo administration declared emergency rule, according to data from the Bangko Sentral ng Pilipinas.

On the week ending March 3, net portfolio investments posted a deficit of $5.3 million, which means foreigners were withdrawing a greater amount of investments than they were placing in peso-denominated financial assets. Gross inflows amounted to $103.7 million, lower than the $109 million flowing out of the country for the period.

President Arroyo declared emergency rule on February 24 and lifted it on March 3.

The lifting of emergency rule, however, led to a reversal of fortunes, as the country enjoyed a surplus of $6.8 million in portfolio investments, with some $1.213 billion flowing into the country and $814.3 million leaving the week after the President recalled emergency rule.

Despite this reversal, net portfolio inflows so far this year were still lower than in the same period last year.

As of March 10, some $1.213 billion in portfolio funds flowed into the Philippines while some $814.3 million left, for a net portfolio inflow of $399.3 million.

Net inflows this year were lower than the $1.026 billion recorded in the same period last year, as $1.532 billion flowed into the country and only $505.7 million left back then.

BSP Governor Amando M. Tetangco Jr., however, said that “the country’s sound economic fundamentals and good fiscal numbers” have kept foreign interest in the Philippines steady, “despite the political problems.”

The Department of Finance earlier reported that the government’s revenue shortfall last month was lower than ceiling.

The government’s budget deficit in February was P2.2 billion below the P27.2 billion ceiling set for the period. This puts the Arroyo administration ahead of its fiscal reform program, leading officials to say the government may balance its budget ahead of a 2010 deadline.

Besides its narrowing fiscal gap, the national government’s outstanding debt also declined slightly to P3.89 trillion as of end-December.

Obligations to foreign creditors, accounting for 44 percent of the total debt, declined by 4.8 percent largely due to a strong peso vis-à-vis the US dollar, the Bureau of Treasury said.

BSP allows banks to place term deposits as reserves (MALAYA) March 20, 2006

The Bangko Sentral ng Pilipinas is giving banks the option to place term deposits with the central bank to comply with liquidity requirements.

Banks currently meet the requirement in the form of market-yielding government securities bought directly from the central bank.

An official from the BSP said the alternative gives the banks flexibility to park their funds either in direct deposit with the central bank or hold a debt paper.

"They now have an option to place funds with the BSP because the rate is the same as that of the government securities," the official said.

The deposits are term funds with short-term maturities.

The requirement for banks to place a proportion of their deposit and deposit liabilities with the central bank is part of the BSP’s open market operations aimed at controlling liquidity in the financial system.

Excess liquidity tends to cause inflationary concerns as the banks use the funds to speculate on the peso.

In July last year, the BSP raised the liquidity reserves by one percent to 11 percent with findings of the excess cash going into the foreign-exchange market weakening the peso.

At the same time, the BSP also raised the regular reserves by one percent to 10 percent.

Regular reserves are the proportion of deposit and deposit substitute liabilities a portion of which is kept at deposit at the BSP and the balance in the banks’ vaults as cash or eligible reserves.

Chief News Editor: Sol Jose Vanzi

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