April GIR up to record $36.7B

The country’s gross international reserves (GIR) reached a record $36.7 billion in April, inching up from a revised $36.6 billion in the previous month, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said inflows included a  loan from the Asian Development Bank, the central bank’s purchase of dollars and income from investments overseas.

The BSP said the National Government (NG) deposited the proceeds of a $329-million program loan from the Asian Development Bank (ADB) under the Local Government Financing and Budget Reform Loan.

The BSP said there was also a trickle of foreign exchange from its foreign exchange operations and income from its investments abroad. 

According to BSP officer-in-charge Nestor Espenilla Jr. the inflows were offset by payments of maturing foreign currency-denominated obligations of the NG and the BSP.    

Espenilla said the current GIR level was enough to cover 6.2 months of imports of goods and payments of services and income. It was also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.4 times based on residual maturity.

The BSP expects the country’s forex reserves to hit $37 billion in 2008. The balance of payment (BOP) surplus, however, is projected to drop to $3.5 billion.

Tetangco admitted that the capital accounts under the BOP was relatively harder to project especially since it was unclear how the US economy would fare under the pressure of the credit market crunch and the balancing impact of the US Federal Reserve Board.

In 2008, the BSP is expecting total remittances from overseas Filipinos to reach $16.2 billion in 2008 with labor deployment increasing despite the slowdown in the US economy.

The overall BOP position is critical in determining the position of the BSP as it performs currency stabilization function by swaying the market to smoothen foreign exchange volatility.

The bigger the surplus, the better the BSP would be able to stabilize the exchange rate whether it is appreciating or depreciating against other currencies, particularly the dollar.

As a proportion of the country’s gross national product, the BSP said the total external debt was equivalent to 34.9 percent, coming down from 36.8 percent at the end of September and 41.7 percent in 2006.

In terms of gross domestic production, the external debt ratio also improved to 38.1 percent, from 40.3 percent in September and 45.4 percent in 2006.

“The declining ratio indicates the country’s improving capacity to service its maturing foreign obligations,” said Tetangco. The BSP reported that the external debt service ratio (DSR) was estimated at 9.6 percent in 2007.

This ratio represents the proportion of total principal and interest payments to total exports of goods and receipts from services and income.

“The DSR has thus remained well below the 20 to 25 percent international benchmark,” Tetangco pointed out. “This indicated that the country has sufficient foreign exchange earnings to service obligations maturing during the current period.”