Monday, 13 July 2009

Philippine Central Bank gifts Finance Department P6B in dividends

Jun Vallecera
Business Mirror

THE Bangko Sentral ng Pilipinas (BSP) has gifted the national government with P6 billion worth of dividends, a sum six times larger than that expected by Finance Secretary Margarito Teves.

BSP Governor Amando Tetangco Jr. gave the money directly to Secretary Teves, who is managing a budgetary shortfall that, in just the first five months, is already half the programmed full-year deficit of P250 billion.

“The money should help the national government report a surplus in July,” Tetangco said late Friday night.

He told reporters the dividends were based on unaudited income totaling P8.927 billion in 2008, a year he described as one of the most difficult in the country’s economic history.

Deputy BSP Governor Armando Suratos said the remittance brought the total number of dividends, taxes and rebates paid to the national government to more or less P125 billion over the 16-year span since the BSP emerged from the ruins of the old Central Bank of the Philippines.

The BSP failed to remit dividends in 2007 when it posted operational losses amounting to P86.94 billion, mostly as a result of the 11.19-percent appreciation of the local currency, the peso. “It was a problem of plenty,” Tetangco said by way of reminiscing the year when the peso’s average exchange rate went up from P48.9143 per dollar in January to P41.7429 per dollar.

The foreign inflows were such that the country’s gross international reserves hit $33.5 billion, forcing the BSP to temper the peso’s steady climb with expensive special deposit accounts or SDAs just so inflation won’t push past the roof.

He reluctantly acknowledged the remittance represented a fantastic rate of return on the national government’s equity position in the BSP.

Failed capital infusion

The national government was supposed to complete the P50-billion BSP capital base two years from when it was restructured in 1993, but managed to infuse only P10 billion.

Tetangco would not dwell on the subject of failed capital infusion by the national government, saying continuing efforts to restart the program seem futile.

Treasury chief Roberto Tan previously said the central bank’s recapitalization program is still on track as efforts to issue a government bond, backed by so-called multiyear obligational authority or MYOA, continue to be pursued.

“I do not understand the MYOA scheme,” Tetangco candidly said.

As crafted by the national government, the line agencies’ MYOA forms the underlying asset by which seven- and 10-year bonds were to be issued by a still undisclosed special-purpose vehicle (SPV).

Investors were supposed to invest in the IOUs on the strength of the multiyear “income stream” represented by budget allocations received each year by the various line agencies.

Tan said the basic plan of using an SPV as issuing entity for the BSP bonds has not been abandoned.

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