Int'l reserves, BOP down in April

Adverse market conditions brought about by the conflict in Mindanao, fears of higher US interest rates and the controversies hounding the local stock market, have taken their toll on the country's external position as the gross international reserves (GIR) and the balance of payments (BOP) posted declines in April.

The GIR dipped slightly to $15.8 billion as of end-April from $16 billion the previous month as the Bangko Sentral ng Pilipinas (BSP) paid maturing foreign exchange liabilities of the National Government, a ranking BSP official who requested anonymity said.

The GIR is used to pay the country's imports, maturing foreign debts of the national government and the central bank. At $15.8 billion, it is equivalent to 4.6 months of imports of goods and payments services. It is composed of foreign exchange denominated assets like gold, currencies, deposits with foreign banks, and securities.

Along with the drop in the GIR, the country's balance of payments (BOP) surplus had gone down to $788 million last month compared to $926 million in March. This was based on the change in the so-called net international reserves (NIR). The NIR stood at $11.912 billion in end-April from $12.7 billion in end-March.

The change is NIR is used to estimate the BOP since it measures the amount of foreign exchange that has flowed into the country net of outflows.

The absence of foreign investments, particularly portfolio funds invested in the stock market, has contributed to the decline in the GIR and the BOP. The official said there was a significant outflow of foreign funds while there was not much inflow. He could not give the figures, though.

Since the start of the year, the stock market has been going down due to controversies arising from the alleged manipulation of the prices of BW by its owners. The ongoing conflict in Mindanao and the rise in US interest rates exacerbated this.

However, the official said compared to end-1999 level of $15.1 billion, last month's GIR reflected an increase due largely to the proceeds from the government's $1.3 billion global bond offering and proceeds from the foreign direct investments coming from the infusion to PLDT by a foreign telecommunications firm.

The end-April GIR level was $1.3 billion short of the BSP's end-year target of $17.1 billion.

Currency traders said the GIR might go down in the next few months following the BSP's intervention at the interbank currency market. While the BSP has denied it has sold dollars at the Philippine Dealing System, traders said it has engaged in a special agreement with two foreign banks to provide liquidity into the market.

Traders said since the peso started trekking the P41 to $1 level, the BSP has sold an estimated $1 billion through its two conduit foreign banks.

Last year, the country's BOP yielded a surplus of $3.839 billion, boosted by exports and the inflow of foreign obligations coming from the proceeds of the borrowings of the national government.

The BOP records the inflow and outflow of foreign exchange into the country arising from trade, investment, and foreign borrowings. It has two components: the current account and the capital account. -- Jun Ebias