NATIONAL GOVERNMENT MUST BORROW ORE TO SHORE UP RESERVES
MANILA, JANUARY 2, 2009 (STAR) By Des Ferriols - Guinigundo Central bank officials said the National Government (NG) should consider increasing its foreign borrowing this year to help build up the country’s foreign exchange reserves amid slowing portfolio investments and export inflows.
Bangko Sentral ng Pilipinas (BSP) Geputy Governor Diwa Guinigundo said borrowing more from the foreign market is a “good option” since it would secure foreign exchange that the National Government would require for debt servicing.
“It would provide them additional comfort that if and when they need foreign exchange, they would have it,” Guinigundo said. “That is something that the government may wish to consider.”
According to Guinigundo, the BSP had availed itself of the usual borrowing facilities for reserve management purposes and contingency purposes.
“We want to prepare for any eventuality so we did that in 2008,” Guinigundo said.
“It’s important that contingency measures are in place so that if and when situation gets worse, we can handle it. We have to continue to show that we have reserves.”
According to Guinigundo, the BSP is hoping that the outlook will improve for 2009 and foreign portfolio inflows, specifically, will start returning in to the country.
The BSP earlier said the country had enough foreign exchange buffers even if portfolio inflows continued to flow out of the country next year.
BSP Governor Amando M. Tetangco Jr. said the BSP has built up reserves to buffer the expected slowdown in foreign exchange inflows from investments and exports in 2009.
“Reserves are built up precisely as insurance for rainy days – and haven’t you noticed, lately, it’s been raining quite heavily,” Tetangco said.
In 2008, the country’s gross international reserves level was projected to hit $36 billion, with the balance of payments (BOP) keeping a surplus of about $500 million.
Tetangco said the 2009 numbers are still being reviewed and the revised projections can not be released until early January when the latest data have been incorporated.
Tetangco said he is comfortable with the country’s reserves level.
“It is difficult to predict the extent risk appetite will retreat from the market,” Tetangco said. “But as I said, our reserves continue to be at comfortable levels.”
“We also have buffers to slowing, even reversing, portfolio flows,” he added.
According to Tetangco, the BSP is expecting robust inflow of foreign exchange in the form of remittances from overseas Filipino workers and foreign exchange receipts from the growing business process outsourcing (BPO) sector.
Tetangco said the BSP is expecting the BPO sector to remain robust even during the prevailing turmoil.
“Also, as oil prices continue to decline, the country’s requirements for foreign exchange would correspondingly ease,” Tetangco said. “These are why I think that our external position will remain in surplus.”
Chief News Editor: Sol Jose Vanzi
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