5-mo BOP surplus climbs to 3-year high of $1.638B

The country’s balance of payments (BOP) surged anew to a surplus of $751 million in May, pushing the five-month balance to a three-year high of $1.638 billion, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

BSP Deputy Governor Amando M. Tetangco said the May BOP was buoyed by the government’s $750-million borrowing, which led to a 3.7-percent rise in the gross international reserves (GIR).

The BOP represents the country’s international reserves position after interest payments and trade with the rest of the world.

Aside from government’s foreign borrowings, remittances from overseas Filipino workers (OFWs) and portfolio investments also contribute to the country’s international reserves.

The country started the year with a BOP deficit of $227 million but has since picked up mainly due to the National Government’s foreign borrowing.

By February, the BOP position had turned around to a $962-million surplus after a $1.5-billion global bond issue in the later part of the month. The March BOP surplus dropped to $98 million due to debt service expenses but bounced back to a $104-million surplus in April.

Tetangco said the BSP has expected the May BOP surplus to be strong after the GIR breached the $17-billion mark in May, reaching $17.337 billion.

Considered as one of the country’s strong points and the main factor that has kept it from verging on a debt crisis, the strong GIR added more strength to the country’s BOP.

For the whole year, Tetangco said the BSP upgraded its projected BOP surplus from $464 million to $852 million due to higher OFW remittances and better investment inflows.

Remittances from OFWs, according to Tetangco, are expected to reach $9.4 billion this year and could possibly go up to as high as $12 billion, including the inflows not captured by the banking system.

Cash remittances from OFWs coursed through the banking channels rose anew last April, pushing the total amount in the first four months up by a hefty 17.2 percent to $3.1 billion, the BSP official said.

In April alone, remittances sustained a double-digit growth trend with $790 million in inflows, higher by 19.1 percent from a year earlier.

Tetangco said that based on their updated estimates, the combined impact of higher dollar inflows and the shift in accounting policies would increase the BOP surplus by almost $400 million this year.

The GIR this year is expected to reach at least $16 billion, compared to the original projection of $14 billion to $16 billion.

According to Tetangco, the May GIR was the highest since April 2002 and enough to cover about 3.9 months of imports of goods and payments of services and income.

Alternatively, Tetangco said the GIR level was equivalent to 3.7 times the country’s short-term debt based on original maturity and 1.8 times based on residual maturity.

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, he said.

Tetangco said the GIR surged when the NG deposited the proceeds of its $750-million global bonds, only partly offset by the foreign exchange requirements for repayments of maturing NG and BSP obligations.