BSP relaxes rules on money going out of RP

The Bangko Sentral ng Pilipinas (BSP) on Thursday approved reforms on its foreign exchange regulatory framework to liberalize existing restrictions on capital outflows. This move is intended to address the strong capital inflows to the Philippines and temper the strengthening of the peso against the US dollar, with minimal impact on domestic liquidity and inflation, the BSP said in a statement. The policy-setting Monetary Board amended some items of the Manual of Foreign Exchange Transactions as part of central bank efforts to adjust to the current economic conditions, said BSP Gov. Amando Tetangco Jr. These changes in the country’s foreign exchange regulatory framework are in line with the policies of other countries in Asia and the Pacific region, resulting in the competitiveness of the country’s foreign exchange regime, Tetangco explained. Tetangco said that the Monetary Board has agreed to double the present ceiling on the amount that residents may purchase from authorized agent banks for outward investments — including investments in Philippine bonds and other debt instruments issued by the government — from $30 million to $60 million. He added that the BSP would lift the registration requirement for outward investments in excess of the $60-million limit and replace this with reporting to the BSP. The central bank plans to extend the period for inward remittance and conversion to pesos from two days to 30 banking days. At the same time, the period for reinvestment of proceeds and related earnings will also be extended, from seven banking days to 30. “These aforementioned measures will provide residents greater flexibility in diversifying and managing their outward investments as well as managing the attendant risks," Tetangco explained. Without documentation The limit on over-the-counter foreign exchange purchases by residents from banks without documentation for non-trade current account purposes was also doubled to $60,000 from $30,000 to encourage customers to conduct transactions via the banking system instead of the unsupervised foreign exchange market, he noted. Meanwhile, the amount non-resident tourists could reconvert at airports and other ports of exit without need for proof of sale of foreign exchange for pesos was increased to $5,000 from $200, Tetangco said. The BSP raised to $1 million from $100,000 the amount residents could purchase from banks to cover advance payments for import transactions without prior BSP approval. The central bank also allowed the private sector to prepay BSP-registered foreign loans funded with foreign exchange from banks without prior approval. Tetangco pointed out that the monetary authorities would continue to use an “enhanced toolkit" in dealing with the surge in capital flows into the Philippines from developed economies. The BSP’s enhanced toolkit includes the building of gross international reserves (GIR), the appreciation of the peso against the US dollar, the prepayment of the country’s foreign debt, and reforms in the foreign exchange regulatory framework. Net inflow of foreign portfolio investments or “hot money" rose to $1.421 billion in the January-September period, up by 520 percent from the same period last year, according to the BSP. The central bank also reported that the foreign portfolio investments into the Philippines accelerated to $7.189 billion in the first nine months of 2010, up by 52.7 percent from the same period last year. Investments in shares of stocks listed on the PSE went up to $5.3 billion, from $3.7 billion in the same comparative period. The GIR widened from $42.528 billion to $53.54 billion by the end of September. — JE/LRS/VS, GMANews.TV