RP'S GROSS  INT'L  RESERVE  (GIR) HITS  NEW  ALL-TIME  HIGH  OF  $34.4 BILLION

MANILA, FEBRUARY 8, 2008
(STAR) By Des Ferriols Friday, February 8, 2008 The country’s gross international reserves (GIR) rose to a record $34.4 billion in January, partly due to the Bangko Sentral ng Pilipinas’ purchase of dollars.

The current level of foreign reserves, up from a revised $33.75 billion in December, is equivalent to five times the country’s short-term foreign debt based on original maturity and 3.1 times based on debt falling due in the next 12 months.

The BSP said that the January GIR level exceeded the end-December 2007 level of $33.8 billion mainly because of inflows from the central bank’s net foreign exchange operations.

The country’s foreign reserves have been steadily rising since 2006 as the BSP has taken advantage of strong dollar inflows to build up the country’s reserves and keep the peso from rising fast.

According to BSP Governor Amando M. Tetangco Jr., the BSP’s investments abroad also generated foreign exchange income which contributed to the reserves together with inflows from remittances, exports and investments.

“The increase in reserves was attributed mainly to inflows from BSP’s net foreign exchange operations on the back of sustained foreign exchange inflows, as well as income from BSP’s investments abroad,” Tetangco said.

At the record-high level, Tetangco said the GIR was enough to cover six months worth of imports of goods and payments of services and income.

On the other hand, Tetangco said the level of net international reserves (NIR), including revaluation of reserve assets and reserve-related liabilities, likewise climbed to $34.3 billion from the end-December 2007 level of $33.7 billion. 

The NIR refers to the difference between the BSP’s GIR and total short-term liabilities.

Tetangco expects the country’s international reserves to hit a record high of $35 billion to $37 billion in 2008 but the balance of payments surplus would drop to $3 billion to $3.5 billion.

By 2008, however, Tetangco expects the BOP surplus to be significantly more tame even if the actual gross international reserve (GIR) was expected to go up to the highest level on record so far.

“We will be coming off a high base,” Tetangco explained. “Also, the assumption is that a large part of foreign exchange inflows will remain with banks to service the needs of their clients.”

Tetangco admitted that the capital accounts under the BOP was relatively harder to project especially since it was unclear how the US economy would fare under the pressure of the credit market crunch and the balancing impact of the US Federal Reserve Board.

In 2008, the BSP is expecting total remittances from overseas Filipinos to reach $16.2 billion in 2008 with labor deployment increasing despite the slowdown in the US economy.

The overall BOP position is critical in determining the position of the BSP as it performs currency stabilization function by swaying the market to smoothen foreign exchange volatility.

The bigger the surplus, the better the BSP would be able to stabilize the exchange rate whether it is appreciating or depreciating against other currencies, particularly the dollar.

According to Tetangco, he was also expecting some developments in the debt payments of the national government after the International Monetary Fund (IMF) said there was some space for a much more aggressive effort to reduce foreign debt.

“It’s a matter of cost-benefit,” Tetangco said. “The NG has to decide whether it could still prepay more of its foreign debt without incurring penalties.”

According to Tetangco, government-owned corporations might actually have this space more than the national government which had already prepaid a significant portion of its outstanding foreign obligations.


Chief News Editor: Sol Jose Vanzi

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