FOREX  RESERVES  SEEN  TO  HIT  $30 BILLION  IN  NEXT  5 YEARS

MANILA, JULY 24, 2006
(STAR) By Des Ferriols - The country’s gross international reserves (GIR) could go up to as high as $25 billion to $30 billion over the next five years.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said over the weekend that although the country’s reserves are not nearly as large as the major markets in the region, it is expected to hit $30 billion over the medium term.

Tetangco said this projection is consistent with the expected expansion in foreign exchange requirements of an expanding economy with brisk exports and steady inflow from overseas Filipino workers.

"This is assuming that we would stay in the current trajectory of macro-economic fundamentals," Tetangco said. "It would not be difficult to see that our reserves would continue to expand in that case."

At present, the country’s GIR is already at record levels, amounting to over $21 billion.

According to Tetangco, the build-up of the reserves over the medium term would support the expansion of the economy.

"The bigger the economy, the higher the reserves that we have to build up," he said. "When you are on an expansion path, building that up would just be the natural result of economic expansion if it is well-grounded on strong fundamentals."

The BSP said earlier that although it is also costly to hold on to high reserve levels, higher foreign exchange stock would provide an even bigger safety net against market volatility.

BSP Deputy Governor Diwa Guinigundo told reporters that with the gross international reserves (GIR) at a record high of over $21 billion and the balance of payment at close to $1 billion, the peso has shown marked resilience against volatility.

"One of the basic principles in reserve management is that no reserve is big enough," Guinigundo said. "It’s costly to hold so much reserve but there is also danger if you do not have enough. It’s a balancing act."

At the present level of GIR, Guinigundo expressed confidence that the BSP at least had enough to meet its maturing obligations based on original and residual maturities.

"The accumulation of reserves is a form of insurance against factors that are largely unexpected," Guinigundo said. "Since our fundamentals are good at this point, having ample reserves would give us enough cushion and we have tended to avoid further depreciation of our currency."

"The wildcard there is interest rate differentials," Guinigundo pointed out. "If it is too narrow or negative, then investors would pull out."

Benchmark interest rates, however, have since adjusted upwards as well as secondary market rates, widening the interest rate differentials after hitting the negative zone.

PAL may go public in 2 years By Zinnia B. Dela Peña The Philippine Star 07/24/2006

Flag carrier Philippine Airlines (PAL) is considering going public in the next two years or by 2008, should it continue to post profits for three consecutive years, according to a top company official.

"We posted profits last year. This year, we’re also confident (of posting a net income) and hopefully next year we will also record profits. If we can do this for three years, we could do an IPO in 2008," said PAL president Jaime Bautista.

Bautista said that should the company pursue its planned listing on the exchange, proceeds from the share offer would be used for acquisition of more aircraft and working capital requirements.

PAL will purchase nine new Airbus 320s over the next three years starting 2006 as part of its refleeting program aimed at further cementing its dominant foothold in the industry.

Funding for the acquisition of new aircraft will come from new loans from various export credit agencies.

At present, PAL has an operating fleet of 31 aircraft consisting of B747-400s, A340-300s, A330-300s, A320-200s, B737-400s and B737-300s with average aircraft age of 9.01 years.

Bautista said the new aircraft will serve regional and domestic routes.

He said the company has been up-to-date in the payment of its obligations to creditors. From $2 billion in 1999, PAL’s debt is now down to just $1 billion.

Last year, PAL made payments for principal and interest to its creditors in accordance with the terms embodied in the amended and restated rehabilitation plan. From March 1999 to March 2005, PAL paid a total of $1.43 billion to its creditors.

On the homefront, Bautista said PAL is looking at additional frequency domestic destinations in Cebu, Davao and other major cities where there is a significant market demand.

From its hub in Manila, PAL serves 43 destinations - 18 domestic and 25 international points.


Chief News Editor: Sol Jose Vanzi

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