JUNE 7, 2006 (STAR) By Des Ferriols - The countryís gross international reserves (GIR) hit a new record high of $21 billion in May due to the combined impact of foreign exchange deposits from government borrowings early in the year as well as income from the Bangko Sentral ng Pilipinasí (BSP) foreign exchange operations.

The BSP said the May GIR level was $92 million higher than the end-April level of $20.85 billion.

BSP Governor Amando M. Tetangco Jr. said the GIR still contained part of the proceeds of the National Governmentís $2.1-billion borrowing early in the year which bankrolled almost two thirds of its total borrowing requirement for the whole year.

Tetangco said the May GIR was adequate to cover about 4.4 months of imports of goods and payments of services and income. This level was also equivalent to 3.3 times the countryís short-term debt based on original maturity and 1.7 times based on residual maturity.

Short-term debt based on residual maturity pertains to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

According to Tetangco, however, the total inflows were partly offset by principal and interest payments of foreign exchange obligations of the BSP and the NG.

The BSP also said the net international reserves (NIR), including revaluation of reserve assets and reserve-related liabilities, likewise increased to $20.290 billion, higher by $81 million from the end-April 2006 level of $20.209 billion.

The NIR refers to the difference between the BSPís GIR and the combined total of short-term liabilities and use of Fund credits.

The BSP is projecting the end-2006 GIR to reach $18 to $18.6-billion and as a result, the balance of payments is expected to reach a surplus of at least $1 billion or higher, mainly due to record-high remittances from overseas workers.

Remittances from overseas Filipino workers, according to Tetangco is expected to reach $11 billion and could possibly go up to as high as $12 billion including the inflows not captured by the banking system.

Despite its initial success, however, the Department of Finance said the government did not have plans of borrowing more than it has to from the foreign market, saying that the Arroyo administration planned to stay with its approved borrowing mix for 2006.

For the whole of 2006, the government would have to finance part of its operations and all of its debt service costs through borrowing since it is not generating enough revenues to be self-sufficient.

For the year, finance officials calculated that the government needed to amortize P119.07 billion worth of principal foreign obligations while servicing P215.5 billion worth of interest payments on domestic debt and P124.4 billion of interest payments on foreign debt.

Chief News Editor: Sol Jose Vanzi

All rights reserved