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Bangko Sentral losses balloon to P78.43B

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Losses of the Bangko Sentral ng Pilipinas nearly trebled as of October last year as its heavy dollar purchases, which were meant to temper the appreciation of the peso, and huge interest payments bloated its expenditures.

Based on its latest income statement, the BSP incurred a P78.43-billion net loss in the first 10 months of 2012, which was nearly three times the P27.29 billion registered in the same period of the previous year.

Documents showed that P41.38 billion of the loss resulted from the central bank’s foreign exchange operations wherein it buys or sells currencies to ease the volatility of the exchange rate. In case of sharp appreciation pressures on the peso, the BSP buys dollars from time to time to temper the local currency’s rise against the greenback.

BSP Governor Amando Tetangco Jr. earlier said the central bank maintained the policy of allowing the value of the peso to be largely determined by the market, but with a flexibility to intervene in some instances to avoid a sharp and sudden rise or fall of the local currency. Extreme volatility of the peso has adverse consequences on businesses and the economy, Tetangco noted.

About P37.05 billion of the BSP loss came as revenues fell short of expenses, mainly interest payments that amounted to P76.84 billion during the 10-month period.

The BSP pays interest on deposits placed by banks such as the overnight and special deposit account (SDA) windows. The acceptance of deposits is a way to help siphon off excess liquidity from the economy to prevent runaway inflation.

Deposits in the SDA facility alone stood at about P1.7 trillion last year.

The sharp rise of the peso last year has elicited complaints from the export sector. Exporters said the significant appreciation of the peso made Philippine-made goods more expensive for foreign buyers and therefore less competitive.


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Tags: Bangko Sentral ng Pilipinas (BSP) , BSP losses , Peso , Philippines

  • oh_noh

    *funny* manipulating the forex from 50+ to 40+ and still losing?
    still not contented and sure wants a stronger peso…

    cheers to a strong economy – in paper!!!

  • TagaMlang

    “BSP Governor Amando Tetangco Jr. earlier said the central bank maintained the policy of allowing the value of the peso to be largely determined by the market, but with a flexibility to intervene in some instances to avoid a sharp and sudden rise or fall of the local currency.”

    This is one of the adverse effects of a floating currency.  To temper the appreciation of the peso, the BSP buys USD’s using borrowed funds.  

    I have always been advocating a fixed-rate-regime.  A fixed currency at say P45/$1 will increase  exports,  increase the peso value of OFWs remittances-increase their buying power, make our BPO and our contractors doing foreign jobs competitive,  and eliminate the costs now incurred by BSP.  

    The only bad side of a fixed-rate-regime is, we will get the “IRE” of currency traders and currency speculators/manipulators, and surely the international currency marauders as well.

  • http://pulse.yahoo.com/_AYITA5V33GYZSLC3G37UCVNTKA Ben

    …and the government is stil issuing T-bills abroad. If we can`t harness the masses and the OFWs` purchasing power to buy our own debt papers…..may the central bank buy the country`s significant debt papers abroad and the issuance of the future T-bills so instead of shipping out the country`s 622 billion peso funds (Oct. 2012 amount used to pay the external debt) for paying debt principals and interests that the government budget each year for her lenders abroad (just imagine how big that money losses each year that can be used sana to rebuild our AFP or the Philippine economy!), the CB will be the sole owner and beneficiary of that yearly budget for paying debt? If we consider this, how the CB will be able to change the country`s financial ability in the future and the impact of who owns our debts? They can sell that debt papers to the OFWs too…but we will know the impact after the CB owns a significant amount of the country`s debt, rather than lenders abroad….use that purchasing power to really alter the country`s vulnerability from outside sources….

    The us biggest owner of the US debt in trillion dollars is the FED in it`s QE (quantitative easement program), may the CB do the same and buy our external debts or future T Bills?

    • parefrank

      That is the reason why BSP pays so a low rate to OFWs. But why it is now so a big problem, when loans that have been starting at a much higher dollar rate can now be repaid with much less pesos?
      UFWs will not be so stupid to buy treasury bills. They would pay now about 41 pesos per dollar value and there is always the bragging that the rate will go more down, meabs they will get less pesos at maturity than they have paid for the bills. 
      Why has Malaysia been able for so many years to hold its currency near stable to the dollar, without using billions to buy dollars. Just declare a fix rate of at least 45 and OFW families can spend more and tourists, exporters and investors will be happy. Even rich Switzerland pegged a fix rate to the Euro and all works well. No other country wants to boost its economy with rising its curency, only the super (dumb?) economists in RP government. Comparing the purchase power and the steady rising peso prices at home even for the now cheaper imported goods, the real peso rate should be at least about 50 to the dollar.

  • http://www.facebook.com/profile.php?id=100000405903680 Garo Ungaro

    The Philippines is still lucky with OFWs pumping $19B in to the economy…helps stabilized the unpredictable market…BSP must be very careful in its management…There’s no solid investments out there…$79B reserve can be erase. and back to zero again….?

  • Hayek_sa_Maynila

    Cut the SDA rate! That’s the biggest service the BSP can give to the Filipino taxpayer. It will even teach Filipinos to save in both corporate bonds and stocks, providing more boost for the PHL capital markets.

    There is room for BSP to carry out unsterilized FX purchases in the spot market since M3 is only growing at single digit rates, slower than the nominal growth of the economy and bank credit is growing less than 20%, just making up for the anemic lending activity from 1998 to 2005.

    BSP must also consider taxing short term capital! We don’t want speculative money. We only want those that will seriously commit themselves to this country, specially now that we are going to bag an investment grade rating.

    • indiots

      kayo lang ang nakakaalam nyang mga hukos-pokus na yan… apektado na ang mga exporter, lalo na ang mga ofw.

    • blainz

      “BSP must also consider taxing short term capital!”

      I’ve thought about this some time ago and had this idea:

      Let’s say the capital gains tax [CGT] for stocks is 6%. Change this to 9% at the time of purchase, with a quarter-percent deduction every two weeks, up to year…

      So holding a stock for a month gives: 9 – (0.25*2) = 8.5%  [higher than current]

      Holding a stock for 6 months gives: 9 – (0.25*12) = 6%  [same as current]

      Holding a stock for 12 months (the limit) gives: 9 – (0.25*24) = 3%  [lower than current]

      This method discourages short-term trading while giving an incentive to long-term holders of stocks. The starting rate, schedule, and increments can be fiddled a bit while retaining the same idea.

      • Hayek_sa_Maynila

        Good Job @blainz:disqus ! Something similar should apply to fixed income securities. 



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