Dollar reserves to reach record on remittances

MANILA, Philippines - The Philippines’ foreign exchange reserves are expected to reach record levels next year, buttressed by the surge in funds sent home by Filipinos working overseas. However, the increase may be unable to further strengthen the country’s financial standing once these funds are used to pay for imported oil and raw materials, prices of which continue to rise. Projected to reach $40 billion by 2009—approximately $3 billion more than the amount expected this year—the country’s dollar reserves may be unable to improve the Philippines’ balance of payments (BOP). After paying for its imports, Manila ended up with a surplus of $8.6 billion last year. This year, monetary officials see a BOP surplus of $2.5 billion, roughly the same amount expected next year. Even with the surge in remittances of overseas Filipinos, the Philippines is still seen to pay more for shipments sourced from abroad, the Bangko Sentral ng Pilipinas (BSP) said. In July, the Philippines’ dollar reserves posted a $142 million surplus, thanks to remittances which reached a record-high of P1.5 billion during the month. The country’s BOP levels also received a boost from the sale of power assets previously owned by the National Power Corp., BSP Governor Amando M. Tetangco Jr said. These inflows were sufficient to reverse a deficit posted in June, the first month BOP shortfall since November. In June, foreign investors became risk-averse, selling their holdings in Philippines stocks and securities and avoiding fixed-asset investments. Although not easily convertible to cash, fixed-asset investments—also known as foreign direct investments—help generate employment since these include capital equipment such as factories, real-estate, and equipment. - GMANews.TV