The BSP said yesterday that the latest GIR level is adequate to cover 4.5 months worth of imports of goods and payments of services and income.
At this level, the GIR is equivalent to 2.8 times the country’s short-term debt based on original maturity and 1.5 times based on residual maturity.
BSP Deputy Governor Amando Tetangco said the April GIR was high because of the combined borrowings of the NG and the BSP.
However, Tetangco said the GIR level is expected to taper off as the government settles its maturing obligations.
The BSP originally planned to postpone its own borrowing until the second half of the year but Tetangco said the opportunity came up for an attractive package last month.
Tetangco said the GIR went up by $86.7 million due mainly to the NG deposit of proceeds of its zero coupon Treasury Bond and the medium- and long-term (MLT) borrowing of the BSP.
However, Tetangco said these inflows were partly offset by disbursements to service the debt requirements of both the NG and the BSP.
The BSP said its net international reserves (BSP-NIR) level at $14.009 billion as of end-April 2004, inclusive of revaluation of reserve assets and reserve-related liabilities, was 3.2 percent or $428.1 million higher compared to $13.581 billion in March 2004.
The BSP said the GIR is officially projected to range between $14 and $15 billion for the whole of 2004.
For the first half of the year, low remittances from overseas Filipino workers (OFWs) as well as weak investments right before the elections would cause a drop in the GIR to the lower end of this projected range.
"These are seasonal factors, particularly in the OFW remittances," Tetangco explained. "It’s also understandable for foreign investments to be jittery since we’re building up towards the elections in the first half."
BSP Governor Rafael B. Buenaventura said earlier that it would take time for investors to regain confidence once the May elections is over and the new administration takes over regardless of who would win.
"Obviously, the dynamics would not return to normal until the second semester and by then, we expect some improvements in the inflows," Buenaventura said.
For this year, the government is planning a less aggressive foreign borrowing approach, sourcing the bulk of its funding requirement from the domestic market.
This year, the BSP has been projecting a modest three percent increase in OFW remittances and 10 percent increase in exports which would generate dollars to beef up the reserves.
However, imports are also expected to go up and drain more dollars from the reserves on top of debt payments that government would have to meet this year.
Unless investor confidence is renewed significantly after the elections, the GIR would have to depend on OFW remittances and government borrowing.