THE BANGKO Sentral ng Pilipinas (BSP) yesterday said it will allow
companies with unregistered loans to buy dollars from banks, in another
move to stem the peso's appreciation amid expectations of continued
heavy capital inflows.
The central bank also raised its outlook for its gross international
reserves (GIR), which hit $71 billion in July, due to these inflows.
"For a certain period, we will allow companies and entities with foreign
loans that are unregistered to buy dollars to service their loans," BSP
Governor Amando M. Tetangco, Jr. told reporters yesterday.
"This will increase the demand for dollars," he said, adding this will
ease pressure on the peso.
The move is also "part of the response to strong capital inflows."
At present, foreign or foreign currency-denominated borrowings must be
approved by and registered with the central bank.
Government borrowings must have prior approval, while those of private
firms must be approved and registered.
This is to allow the BSP to monitor the size of the country's foreign
obligations and keep debt servicing costs manageable.
For private firms, approval and registration are required if the loans
are guaranteed by the public sector or covered by foreign exchange
guarantees issued by authorized agent banks.
Another condition is if the loans will be serviced with foreign exchange
to be purchased from these banks or these banks' forex units, or
obtained by non-bank financial institutions for the purpose of relending.
"Even if they did not register, they will be allowed to buy dollars
because the present regulation says you have to register before you have
to buy dollars," Mr. Tetangco said.
The plan will be implemented next year and for a limited period. Mr.
Tetangco stressed the dollar purchases should be used to pay for
existing dollar-denominated debts.
At present, Mr. Tetangco said those with unregistered foreign loans buy
dollars from the "parallel market" or the black market.
The peso, even if it slid to P42.285 per dollar yesterday, has remained
strong as it opened at the P44-per-dollar level at the start of the year.
Exporters have complained, while shipments have slowed due to declining
orders from abroad.
Capital inflows, meanwhile, have been strong this year, as emerging
markets have attracted investments seeking yields.
Foreign portfolio investments -- also known as "hot money" for the ease
with which they enter and exit the economy -- hit $2.832 billion as of
Aug. 12, more than four times the $715.97 million as of Aug. 13 last year.
The central bank has been unwilling to impose capital controls, choosing
instead to make it easier to buy dollars.
In October of last year, the BSP approved new rules that made it easier
to take dollars abroad.
Among others, it increased the limit of over-the-counter foreign
exchange purchases by residents to $60,000 from $30,000 at authorized
agent banks and foreign exchange corporations.
It also raised the pesos departing tourists or balikbayans may convert
back to dollars to $5,000 from $200 without need to show proof they sold
dollars for pesos.
With capital inflows expected to remain heavy in the coming months, Mr.
Tetangco said the BSP now expects the GIR to rise to $74-75 billion this
year.
The central bank originally forecast $70 billion but this was breached
two months ago.
Mr. Tetangco said the balance of payments (BoP) surplus could be higher
than expected as "the first semester [figures] were already big."
The country recorded a $6.3-billion BoP surplus as of July, up by 82%
compared to last year. This was also around 94% of the full-year
estimate of $6.7 billion.
The central bank attributed the high surplus to inflows from
remittances, exports and tourist receipts and investments. -- N. J. C.
Morales
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