Forex reserves up slightly to $16.53B in March

Despite payments made by the government to service its foreign debts, the country’s gross international reserves (GIR) inched up to $16.531 billion as of end-March from $16.530 billion a month earlier, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP attributed the slight uptick to inflows from foreign exchange operations as well as income from investments abroad.

The BSP said yesterday that the March GIR level was good for about 3.7 months worth of imports of goods and payments of services and income and equivalent to 3.5 times the country’s short-term debt based on original maturity.

BSP officer-in-charge Alberto V. Reyes said the inflows from BSP’s foreign exchange operations helped mitigate the foreign exchange requirements for repayments of the national government and BSP’s maturing debts.

Short-term debt based on residual maturity refers to outstanding short-term external debt on original maturity plus principal payments on medium and long-term loans of the public and private sectors falling due within the next 12 months.

As long as the GIR could cover these obligations, the country would be comfortably out of the default zone.

Reyes said the BSP’s net international reserves, on the other hand, amounted to $15.406 billion inclusive of revaluation of reserve assets and reserve-related liabilities.

The BSP said that based on its latest estimates as well as projections made by the Board of Investments and the Philippine Economic Zones Authority (PEZA), both foreign direct investments and portfolio investments would slowdown in 2005.

As a result, the BSP said the country’s BOP surplus would be lower than expected as the BSP reviewed the investment accounts in the BOP for the whole of 2005.

Earlier, BSP Governor Rafael B. Buenaventura said he expects the BOP to enter the surplus zone in March but said the more important number was the year-end position.

Buenaventura said the BSP’s BOP projection for 2005 was based on the estimated inflow of investments, remittances from overseas Filipino workers and borrowings of the government for the refinancing of its maturing foreign currency-denominated obligations.

"There was no implicit assumption of government borrowing proportions, we just made calculations based on the amount of foreign-denominated maturing obligations," Buenaventura said.

On the other hand, Buenaventura said the BSP expects further increases in OFW remittances especially with the improvements in bank remittance services that specifically target OFWs.

Buenaventura said the delisting of the Philippines from the anti money-laundering list would also reduce friction costs and encourage OFWs to use the formal banking system, thereby allowing the BSP to capture the bulk of the inflows from OFWs.