BSP keeps close watch on capital flows

MANILA, Philippines - The central bank is reminding public and private enterprises of their duty to submit their foreign borrowing plans for next year by the end of this month.

“In line with the responsibility of the Bangko Sentral ng Pilipinas (BSP) to manage the impact of capital flows on the economy, resident entities intending to borrow from offshore sources…are required to submit their foreign borrowings plan for the ensuing year to the BSP,” an announcement at the BSP website stated.

The policy is stated in Section 22 of the Manual of Regulations on Foreign Exchange Transactions issued under BSP Circular No. 645 Feb. 2009, it added.

Required to submit their borrowing plans are the national government and state-owned and –controlled corporations. Private banks, companies and corporations that aim to borrow “at least $10 million or its equivalent in other foreign currencies” should also notify the BSP, the notice said.

This will include those planning to avail of loans or issue bonds abroad to finance their operations.

Firms borrowing smaller amounts are likewise “encouraged” to report their financing plans for next year, BSP said. All parties are given until Sept. 30 to submit their plans to the BSP’s International Operations Department (IOD).

“The survey is an annual exercise done by the IOD to obtain an indication of the magnitude and timing of the economy’s foreign financing requirements for the following year, as well as the beneficiary sectors/projects/activities of such fund raising activities,” the announcement said.

“Information gathered from the survey are held under strict confidentiality rules and used in preparing projections on capital flows and assessing their implications,” it added.

BSP has been keeping a close watch on capital inflows as these may trigger inflationary pressures if not managed very well. Also, huge flows denominated in other currencies may raise demand for peso, and thus contribute to its appreciation.

A strong currency, while making imports more affordable, also trims dollar

export earnings when they are converted into pesos in the country. It also lowers the value of remittances from overseas Filipinos.

For next year, official data showed the national government has programmed P757.75 billion in borrowings next year to finance a budget deficit expected to hit P241 billion. Of the total amount, P189.9 billion will be sourced from foreign creditors.

BSP has been encouraging the government to borrow domestically and just use the proceeds to buy dollars from the reserves, for its financing needs. It said the state could take advantage of the high domestic liquidity in the country.

Money supply rose 8.7 percent as of July to P4.6 trillion, latest BSP data showed.