RP incurs BOP deficit as government settles $1.4-billion debt

MANILA, Philippines - The country’s balance of payments (BOP) position registered a deficit in February as the government settled its maturing foreign obligations amounting to about $1.4 billion resulting in more foreign exchange outflows, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the BSP yesterday showed that the country registered a BOP deficit of $125 million last February, a complete reversal of the $469 million surplus posted in the same month last year.

As a result, the country’s BOP surplus was cut by half to $1.108 billion in the first two months of the year from $2.204 billion in the same period last year. The BOP, which refers to the difference of foreign exchange inflows and outflows on a particular period, represents the country’s transactions with the rest of the world.

BSP Governor Amando M. Tetangco Jr. said in a text message that the amount used by the government to settle and redeem its maturing financial obligations particularly global bonds exceeded the amount of foreign exchange inflows.

“This was due to timing issue, principally on national government inflows and redemptions. But the cumulative position is still in surplus,” Tetangco stressed.

The country’s BOP position managed to stay in positive territory in the first two months of the year after it booked a surplus of $1.233 billion in January with the proceeds of the $1.5 billion global bond issuance of the national government.

For his part, BSP Deputy Governor Diwa Guinigundo said the outflows came from the servicing of maturing debt particularly the redemption of Eurobonds that matured last month.

“This was due to debt servicing mainly Eurobond maturities,” Guinigundo added. About $1.4 billion worth of foreign obligations consisting mainly of Eurobonds matured in February.

The last time the country’s BOP position posted a deficit was in 2004 with $280 million. Last year, the country’s BOP surplus reached a new record level of $5.295 billion from a surplus of $89 million in 2008. The actual surplus was almost $300 million than the BSP’s revised forecast of $4 billion and $5 billion.

The Philippines shrugged off the global recession and posted a portfolio investments net inflow of $388.02 million last year, a complete reversal of the $1.784 billion outflow posted in 2008. Inflows, the BSP data showed, amounted to $6.335 billion last year or 23.8 percent lower than the $8.321 billion inflows registered in 2008 while gross foreign portfolio investment outflows fell 41 percent to $5.947 billion from $10.105 billion.

This translated to a 20 percent increase in the country’s gross international reserves (GIR) that reached a new record high of $45.033 billion from $37.55 billion due to strong inflows, government deposits, and the increasing value of the central bank’s gold holdings. The GIR is the sum of all foreign exchange flowing into the country.

Likewise, overseas Filipino workers’ (OFW) remittances went up by 5.6 percent to a new record level of $17.35 billion last year from $16.42 billion in 2008.