BSP trims losses in 11 months

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) further trimmed its losses by 47.5 percent in the first 11 months of last year as it continued to enjoy higher gains from foreign exchange fluctuations.

Data showed the net loss of the central bank amounted to P3.77 billion from January to November last year, P3.42 billion lower compared to the P7.19 billion in the same period in 2014.

Revenues jumped 12.3 percent to P52.02 billion from P46.31 billion, while expenses rose 3.9 percent to P65.72 billion from P63.25 billion.

Gains from foreign exchange fluctuations went up 1.8 percent to P9.93 billion in the first 11 months of last year compared to P9.75 billion in the same period in 2014.

The BSP books gains or losses from fluctuations in foreign exchange rates on matured, sold, paid and/or exchanged or settled foreign exchange assets and liabilities.

The central bank’s earnings from interest surged 17.2 percent to P35.48 billion from P30.27 billion, while miscellaneous income from reduced trading gains from domestic and foreign currency securities climbed 3.1 percent to P16.54 billion from P16.04 billion.

On the other hand, the BSP said its interest expense on loans payable and other foreign currency deposits as well as cost of minting or printing of currencies went up 5.8 percent to P44.72 billion in the first 11 months last year from P42.28 billion in the same period in 2014.

Losses are incurred when the peso strengthens against foreign currencies resulting in foreign exchange revaluation losses for the BSP since the value of its foreign exchange holdings falls below their acquisition cost.

The central bank also records losses when it buys foreign exchange paid in pesos to mop up excess liquidity in the system. Having more money in circulation could lead to higher inflation, adversely affecting exporters, overseas workers or domestic producers.

The primary objective of the BSP is to promote price and financial stability conducive to balanced and sustainable economic growth. It also seeks to maintain monetary stability and the convertibility of the peso by performing a wide range of functions involving money, banking and credit in the performance of this mandate for stabilization.

The central bank is faced with the challenge of dealing with the consequences of strong foreign exchange inflows that have resulted in strengthening of the peso against other currencies.

The BSP has been incurring heavy financial losses since 2010 in its efforts to temper currency fluctuations that could be destabilizing.

In 2012, the BSP recorded a record loss of P95.38 billion as it recorded losses amounting to P50.4 billion on foreign exchange fluctuations as well as the buildup in the amount of cash parked in the vault of the BSP through the special deposit account (SDA) facility used to siphon excess cash from the economy.