MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) sees more accumulation in the country’s foreign exchange reserves within the year as preliminary figures show Philippines’ buffer funds have reached a new high last month.
“For July, preliminary figures show GIR (gross international reserves) amounted to $78 to $79 billion, in excess of this year’s target of $77 billion,” BSP Governor Amando Tetangco Jr. said during the House appropriations committee budget briefing yesterday.
Total seven-month GIR will be good for a year worth of imports, he added.
BSP has forecasted GIR to reach between $77.5 and $78 billion this year. With the July figure already exceeding this, Tetangco told reporters after the morning hearing: “We will review that… most likely (there will be a revision).”
GIR serves as buffer against external shocks and is part of the country’s balance of payments, which measures a country’s capacity to meet its external obligations. Official GIR data for July will be released on Aug. 7.
In June, BSP cut its GIR forecast from $79 billion, citing the prevailing debt crisis in Europe and the sluggish growth in the United States that could prompt investors to pull out their money from emerging markets like the Philippines.
Tetangco said the rise in reserves in July was due to BSP’s “foreign exchange operations.”
During the congressional briefing, Tetangco chief told congressmen the peso’s “appreciation could persist” despite already strengthening by 5.1 percent against the dollar as of end-July due to large capital flows.
A strong peso makes imports more affordable. However, such could also make Philippine products expensive abroad, thereby reducing export earnings, as well as trim the value of remittances from overseas Filipino workers.
“There is the risk of surge of capital flows that could give rise to inflationary pressures,” Tetangco explained.
So far, however, inflation had been stable for the first half of the year at three percent, Tetangco clarified, saying a benign inflation “gives BSP more room to make policy actions if needed.” - By Prinz P. Magtulis
