Government's foreign borrowings boost BOP surplus

MANILA, Philippines- The foreign borrowing of the national government has boosted the country’s balance of payments in January, the Bangko Sentral ng Pilipinas reported on Monday. After ending 2008 at mere $88 million, the balance of payments surplus bounced back to $1.735 billion in January this year. The BSP said the BOP surplus rose as the national government deposited the proceeds of its $1.5-billion commercial borrowing in January. The country's gross international reserves (GIR) reached $39.6 billion at the end of January, rising by $2 billion from the end-2008 level as government borrowing boosted reserves. With oil prices drastically lower and import demands softening, the BOP surplus was significantly larger than the January 2007 surplus of $259 million and the second-highest surplus level since 2004. The national government completed various foreign borrowing activities at the end of December and early January. The BSP said the NG deposited the proceeds from its issue of 10-year global bonds and another significant deposit was made by the Power Sector Assets and Liabilities Management Corporation (PSALM). PSALM deposited the proceeds from the privatization of the National Transmission Corporation (Transco). According to the BSP, there were also inflows from the BSP's foreign exchange operations and income from its investments abroad. "These inflows were partly offset by payment of maturing foreign exchange obligations of the NG," the BSP said. Despite the January surge in the surplus level, however, the BSP still kept a conservative projection for the 2009 BOP surplus, saying that the level was likely to exceed $500 million that was originally projected for 2008 but would stay below the $2.3-billion surplus originally projected for 2009. Central bank governor Amando Tetangco said the surplus level was unlikely to exceed the $2.3-billion originally projected for 2009 but the BOP would prove more resilient this year than 2008. "The decline in oil prices has been significant and with exports also likely to be softer this year, the BOP surplus could easily better last year's surplus," said Tetangco earlier. Tetangco said the BOP surplus would be supported by inflows from the national government's commercial borrowing as well as the proceeds from official development assistance (ODA) that were booked early this year. But the central bank chief said weakening imports would also ease some pressure on the country's reserves since global demand was expected to fall even more dramatically this year. As global consumption slows down, the country's import-dependent exports would also weaken and this would hit the BOP from two opposing sides: on the one hand, there would be less dollar outflows paying for imported components and on the other, there would also be less inflow from exports. This year, Tetangco said the country's foreign exchange reserve is expected to hit $37.5 billion, slowing down slightly from the expansion in previous years as inflows weaken due to the global economic slowdown. Tetangco revealed that the GIR would reach between $37 billion to $37.5 billion, only slightly higher than the 2008 level of $37.1 billion. The country's reserves soared to $37.1 at the end of 2008, sustaining the recovery that foreign exchange inflows made in November as a result of inflows from government borrowing and other inflows.GMANews.TV