BSP eyes diversifying PHL forex reserves

The Bangko Sentral ng Pilipinas (BSP) governor wants to diversify the Philippines’ foreign exchange reserves as cushion against the impact of a possible United States sovereign credit rating downgrade. In an interview with reporters, BSP Governor Amando Tetangco Jr. said monetary authorities are looking at diversifying the Philippines’ gross international reserves (GIR) by investing more in Europe or beefing up the BSP’s gold reserves to reduce the exposure to US assets — now on the brink of losing its triple-A credit rating. “We will find ways to diversify while there are opportunities, but diversification must observe the guidelines," Tetangco said. Tetangco added that despite the US debt crisis, the US credit rating has a 50-50 chance of a Standard and Poor’s downgrade, and also a lower possibility of downgrading the US triple-A rating on the part of Moody’s Investors Service and Fitch Ratings. “In the case of the US, it is still triple A rated. If ever there will be a downgrade, it won't happen right away. If the market is satisfied with the [US] deficit reduction over the medium- to long-term that may serve as a reason not to downgrade," the BSP chief said. Rise in foreign reserves The GIR, or the Philippines’ total foreign exchange inflows, rose by 41.7 percent to $68.996 billion as of end-June this year from $48.704 billion in the same period last year. Meanwhile, the BSP’s income from investments abroad increased by 48.2 percent to $59.48 billion in June from $40.13 billion in the same period in 2010. Posting an 11-percent climb were the BSP’s gold holdings to $7.62 billion from $6.86 billion, the bank said. The BSP’s earnings from foreign-exchange operations, on the other hand, plunged by 29.7 percent to $359.13 million in June from $510.9 million in the same 2010 period. The GIR level as of end-June can cover 10.3 months worth of goods imports and payments of services and income, as well as 10.2 times the Philippines’ short-term external debt based on original maturity, and 5.9 times based on residual maturity. The central bank also sees the GIR reaching a new record $70 billion in 2011 and $75 billion next year, after the country’s foreign exchange reserves increased by 41 percent to a record $62.37 in 2010 from $44.24 billion in 2009. — PE/VS, GMA News