Tuesday, July 8, 2008 [ philstar.com ]
The country’s gross international reserves (GIR) rose to a record $36.7 billion in June even after the Bangko Sentral ng Pilipinas (BSP) intervened in currency markets to sell dollars to support the ailing peso.
The rise in reserves in June reflected proceeds from the sale of government power assets and the central bank’s income from investments abroad. May’s reserves were revised down to $36.2 billion from $36.6 billion.
“The increase in reserves was attributed mainly to the deposit by the Power Sector Assets and Liabilities Management Corp. of proceeds from the privatization program of the National Power Corp. (Napocor), as well as the central bank’s income from its investments abroad, credits from foreign financial counterparts, and revaluation gains,” BSP Governor Amando Tetangco Jr. said.
“These receipts were partly offset, however, by outflows arising mainly from payments of maturing foreign currency-denominated obligations of the National Government and the central bank, and prepayments of Napocor’s various foreign loans,” Tetangco said.
Like authorities in South Korea, Thailand and India, the BSP has tried to prop up its currency to help in the fight against inflation, which is largely being fuelled by rising import costs.
The peso is Asia’s worst-performing currency after the South Korea won, having lost more than nine percent against the dollar so far this year as investors worry about the economic impact of inflation, which currently stands at a 14-year high of 11.4 percent.
In contrast, the peso was Asia’s top performer last year, gaining 19 percent.
Foreign reserves fell in both April and May. The BSP has been intervening in the spot currency market since at least March, traders said.
While BSP’s international reserves have risen, its holdings of foreign currencies through forward swaps have fallen 30 percent to $6.3 billion at the end of May compared with April, and by nearly 52 percent from the peak of $13 billion in January and February.
The central bank’s currency swaps serve as a foreign exchange buffer for the monetary authority, as these represent additional foreign reserves the central bank would hold when the swap contracts are unwound.
The current level of international reserves can cover six months of imports of goods and payments of income and services. It is also equivalent to 5.1 times the country’s short-term external debt based on original maturity and 2.9 times based on residual maturity, or debt falling due in the next 12 months.
The end-June reserves are close to the top end of the central bank’s forecast of end-year reserves of $35 billion to $37 billion against $33.7 billion at the end of 2007.
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