MANILA, MARCH 8, 2007 (STAR) By Des Ferriols - The country’s gross international reserves (GIR) hit a record $24.37 billion at the end of February mainly due to government borrowing, Bangko Sentral ng Pilipinas (CBSP) Governor Amando M. Tetangco Jr. said yesterday.

The reserves stood at $23.69 billion at end-January.

Tetangco said the reserves had also been boosted by the central bank’s own foreign exchange operations and income from investments abroad.

"The increase in reserves was traced to several factors, including the National Government’s deposit of the proceeds from its program loans from the World Bank and the Asian Development Bank," Tetangco said.

The reserves are enough to cover about 4.7 months’ worth of imports and are equivalent to 4.3 times the country’s short-term external debt, he said.

Tetangco had said earlier the reserves would likely exceed this year’s target of $24 billion given higher-than-expected remittances from workers overseas, growth in exports and a sustained inflow of portfolio investments.

The market has been reporting that the BSP is actively mopping up foreign exchange from the open market to take advantage of cheap dollars and build up its reserves.

Tetangco said the inflows were only partly offset by payments of maturing foreign exchange obligations of the National Government and the BSP.

"In terms of reserve adequacy, the end-February GIR level is enough for 4.7 months of imports of goods and payments of services and income," Tetangco said.

This level of reserves was also equivalent to 4.3 times the country’s short-term external debt based on original maturity and 2.5 times based on residual maturity.

Tetangco said the projected GIR for this year would be $1 billion more than the $23-billion recorded in 2006.

Remitances from overseas Filipino workers (OFWs) are expected to reach a record-high of $14.7 billion this year, up from $13.4 billion in 2006.

The increase in labor deployment as well as the improvement in the salaries of workers deployed offshore is expected to contribute to the growth in remittances despite the anticipated slowdown in some labor markets.

"Of this amount, it is estimated that roughly $14 billion will pass through the banking system," Tetangco said.

In 2006, total remittances that were coursed through banks surpassed all expectations, reaching a total of $12.8 billion for the whole year on the back of a new monthly record high in December where banks reported inflows of $1.3 billion.

The whole-year total including the funds that went through non-bank channels, however, reached $14 billion, Tetangco said. At this rate, the amount that went through the banking system actually accounted for roughly 91 percent.

This year, Tetangco said banks are expected to capture an even bigger share of the remittances equivalent to about 95 percent of total OFW inflows.

According to the BSP, the strength of cash remittances have been traced to two major factors that have kept monthly OFW inflows in excess of the billion-dollar level for the eight consecutive months last year.

According to Tetangco, the demand for OFWs is expected to increase further as the government made OFW deployment a priority program, targeting jobs overseas in the technology, health and domestic services sectors. — With AFP

Chief News Editor: Sol Jose Vanzi

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