Tuesday, 8 March 2011

GIR at new high of $63.9-B in February

Manila Bulletin

MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Governor-in-Charge Juan de Zuñiga Jr. yesterday said the country’s gross international reserves (GIR) climbed to a new record high of $63.947 billion as of the end of February, boosted by strong inflows from remittances and a $389 million revaluation gains from gold holdings.

Zuñiga said in a press release that inflows also consisted of receipts from foreign exchange operation and income from investments abroad. Total gold holdings as of February amounted to $6.97 billion while foreign exchange transactions yielded lower gains of $333.64 million from January’s $433.75 million. In the meantime the total foreign exchange investments of the BSP increased to $55.149 billion from $55.032 billion in January.

The GIR level is sufficient to cover up to 10.5 months worth of imports of goods and payments of services and income. It was also equivalent to 11.1 times the country’s short-term external debt based on original maturity and 6.1 times based on residual maturity.

For this year the BSP forecasts GIR will reach $70 billion. In 2010, reserves amounted to $62.4 billion.

To improve its income from investments abroad, the central bank was planning to raise its investments in emerging market debt (EMD) by $300 million this year.

However sources said BSP was concerned about "constraints" to investing in EMD, such as that EMD currencies are not considered as reserve eligible, which means the additional $300 million investments in EMD will not be considered part of the GIR.

BSP said investing in global EMD would still entail extra returns for the BSP's portfolio, but betting on their creditworthiness may not be appropriate at the moment, said sources.

As of September 2010, only $300 million of the $45 billion investable foreign assets were invested in the Asian Bond Fund (ABF), such as the EMEAP (Executives’ Meeting of the East Asia-Pacific Central Banks) ABF1 which have exposures in a basket of dollar-denominated bonds issued by sovereigns in Asia, and the so-called ABF2 which the Philippines was also investing in. ABF2 was a Pan Asian bond fund with several single market funds or bond exchange traded indices.

Sources said under current review include plans to invest $300 million additional funds to existing ABF or the new bond fund to be put up by the Bank for International Settlements, and another $200 million to be placed in inflation-linked bonds or treasury inflation protected securities.

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