Phl posts $582-million payments surplus in August

MANILA, Philippines - The country’s balance of payments (BOP) continued to post on a surplus – albeit at a lower amount – last month with the year-to-date figure already almost double the official forecast for the year, central bank data showed.

BOP surplus hit $582 million last month, down from $1.267 billion recorded same period last year. Nevertheless, the eight-month tally of $5.080 billion already surpassed the Bangko Sentral ng Pilipinas’ (BSP) forecast of $2.6 billion.

BSP Governor Amando Tetangco Jr. said last Monday that the BOP outlook would be reviewed next month.

Analysts have pointed to BSP’s buying of dollars to tame an appreciating peso for the continued swelling of the BOP. A strong peso trims dollar export earnings and the value of remittances from overseas Filipinos.

BOP – which summarizes a nation’s transactions with the rest of the world – measures the capacity of a country to settle its debts and meet external trade obligations. A surplus means the country has more resources to meet future external requirements.

BOP – which hit a surplus of $10.179 billion last year – is composed of current and capital accounts. Current account transactions include remittances from overseas Filipino workers and exports, while those of capital account pertain to foreign investments in the stock and bond markets as well as long-term capital investments in the country.

The Department of Finance has asked the central bank for an authority to issue around $1.5 billion in new debts this year as part of its third liability management program aimed at retiring expensive foreign debts, a Finance official said yesterday.

 “We asked for about $500 million for dollar bonds and around $1 billion for the GPN (global peso notes),” Finance Undersecretary Rosalia de Leon said in an interview.

Both issues would have a tenor of 10 years, she added.

Sources was quoted as saying yesterday that the Bangko Sentral ng Pilipinas (BSP) already given its go-signal for the Aquino administration to issue global peso and dollar bonds, but De Leon said her office has not received any confirmation yet as of yesterday.

Nevertheless, De Leon, who is in charge of the department’s International Finance Group, said the amount being requested “will not be maximized.”

Both transactions—the global peso bonds and dollar bonds to be issued onshore—will likely cover for the remaining $750 million foreign borrowing program for the year supposed to be used to pay debts abroad, she explained.

 “We will no longer tap it in a sense that we will no longer use it to fund our foreign debt service,” De Leon said. “We can always issue more locally and buy dollars from the BSP if necessary.”

Global peso bonds are securities issued in peso, but are settled in dollars. By issuing such bonds, the government reduces its foreign exchange risk or the fear that its foreign debts will be more expensive when converted to pesos due to currency volatilities.

Issuing dollar bonds in the country, meanwhile, will be a sort of assistance to BSP’s mandate of managing the peso’s volatility. The issue will raise dollar proceeds for the government to be used for its debt service abroad without the fear of contributing to the currency’s appreciation.

A strong peso, while making imports cheaper, also trims dollar export earnings and the value of remittances from overseas Filipinos.

 “We want to retire expensive foreign debts,” De Leon said, without elaborating.

This was the third liability management program under the present administration. The government initially sold $1 billion in GPN in September 2010 and issued $1.5 billion in dollar bonds last January, proceeds of which were used to buy back foreign debts.