According to the Institute for Development and Econometric Analysis, Inc. (IDEA), the national government is expected to have registered a budget deficit in January as it has front-loaded expenses to take advantage of the pleasant weather, Budget Secretary Florencio B. Abad said. Finance Secretary Cesar V. Purisima, meanwhile, disclosed that the government have exceeded the Php129.4 billion expenditure recorded a year ago. He, nevertheless, underscored the strong collection performance of the Bureau of Internal Revenue and the Bureau of Customs by exceeding their respective collection target for January this year.
Meanwhile, the debt service burden-to-current account ratio eased to 8.59 percent in October 2010, lower by 1.71 percentage points 12 months earlier. This means an improvement in the ability of the country to settle foreign currency-denominated debts. The central bank relates this development from the rising inflow of foreign currencies, by and large as remittances and portfolio investments. Likewise, the Bureau of Treasury (BoT) rejected some of the bids for the 25-year Treasury bonds last week to resist a brisk increase in interest rates as investors were already concerned with higher inflation. The BoT was only able to raise a third of its Php9?billion borrowing plan, at a rate of 8.14 percent, up by 21.5 basis points from the previous auction in September 2010 that fetched to a rate at 7.925 percent.
Furthermore, net inflow of foreign portfolio investments (FPI)—also referred to as ‘hot money’—increased by 13.5 percent or US$22.96 billion to US$193.09 million in January compared from last year. Gross inflows grew about threefold to US$1.537 billion in January from US$576.05 million a year ago, while gross outflows more than tripled to US$1.344 billion from US$405.92 million. The January net FPI inflow, however, was lower than previous month's US$428.4 billion. The Bangko Sentral ng Pilipinas blamed intended profit?taking and tensions in Egypt to have triggered large sell?offs.
On a more positive note, according to the same report, remittances sent home by overseas Filipino workers (OFWs) in 2010 hit a record high of US$18.763 billion, showing an 8.2 percent growth from the previous year’s US$17.348 billion. Last year is the second consecutive year that surpassed the 8 percent expansion forecasted by the Bangko Sentral ng Pilipinas (BSP). The BSP attributed the massive inflow from the diversity of OFW destinations, skills of workers, and innovations in remittance channels. The central bank said that it is again willing to collect foreign exchange losses in 2011 if the peso continues to gain strength, hence requiring more dollar purchases to eased its appreciation. Bangko Sentral ng Pilipinas Governor Amando Tetangco, Jr. said that posting income from foreign exchange operations is not among the central bank's main mandate.
Overall however, the BSP has incurred Php34 billion in foreign exchange losses in the first half of 2010 as it engaged in fighting the steep appreciation of the peso.
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