Sovereign wealth fund mulled

Central bank stands ready to supply gov’t with dollars

A+
A
A-

AFP FILE PHOTO

MANILA, Philippines—With an improving fiscal situation, the national government is considering establishing a sovereign wealth fund that it can use for various investments, the profits of which can be tapped for various development projects.

This was according to Governor Amando Tetangco Jr., who said the Bangko Sentral ng Pilipinas would be willing to sell dollars to the national government should the creation of the fund be pursued and should foreign currency-denominated assets be considered among the investment options.

“The government is looking into it [creation of the fund]; it is very much on the drawing board right now,” the BSP governor told reporters on Wednesday at the sidelines of the annual convention of the Chamber of Thrift Banks.

He said the Department of Finance, headed by Secretary Purisima, has begun a study on the merits and feasibility of creating the proposed sovereign wealth fund.

The proposal for the establishment of the said fund came amid the country’s growing foreign exchange reserves, which currently stand at about $84 billion.

The BSP, however, is not allowed by its charter to invest the foreign-exchange reserves in risky assets and undertakings, and is confined to investing in conservative assets, such as US treasuries.

But Tetangco said the national government can create the fund and then buy dollars from the BSP in the event it decides to invest in foreign currency-denominated assets or projects offshore. He said that given the Philippines’ substantial foreign-exchange reserves, the BSP has flexibility to sell dollars to the government.

“Right now there are legal constraints for the BSP to go into something like creating the sovereign wealth fund. So if the government decides to put up this fund, the BSP can sell them dollars, which they can use to fund their investment operations, particularly abroad,” Tetangco said.

According to Tetangco, the country’s gross international reserves (GIR) exceed all benchmarks for adequacy.

The GIR of $84 billion is enough to cover for nearly one year worth of its import requirements. It was also equivalent to 6.6 times the combined short-term, foreign currency-denominated debts of private and government entities in the Philippines.

Based on international standards, a country’s GIR is said to be adequate if it can cover three to four months’ worth of its import requirements, or if it is equal to the short-term debts to foreign creditors.

The buildup of the country’s foreign-exchange reserves is attributed to strong inflow of remittances, foreign portfolio investments, and foreign investments in the business process outsourcing (BPO) sector.

The inflows have allowed the BSP to buy dollars from the foreign exchange market—an activity that it does if it sees need to temper appreciation pressures on the peso.

Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • OFW_Investor

    i

  • OFW_Investor

    Putting up Sovereign Wealth Fund means the money will be invested abroad. Only few people will benefit from these , primarily the fund managers with its fees. This is not inclusive growth. Yet here we are, our country needs rails,highways,power,water all subcontracted to the private sector at huge delay adue to funding issues and unquantified costs to the public.

  • norman1211

    its about time that we have a sovereign wealth fund it will have a positive impact on our image abroad and will enhance our credibility in the eyes of the investors only few countries in the world have a sovereign wealth fund and adding the PHILIPPINES to its roster will have an impact positively to our country.

  • OFW_Investor

    Why not fund these PPP’s first?

  • OFW_Investor

    pay the debts first as it comes due.

  • troyg318

    why invest outside when they can use the money to fund much needed infrastructure here first, to support tourism and in return will create jobs and generate taxes for the government.

  • Matambaka

    I a agree..Its a good idea. maraming bansa dina ng may Sovereign Wealth Fund….

  • NoWorryBHappy

    That is a very good idea only if the we have a sincere and incorruptible president
    like Noynoy. Pero kapag ang naging presidente ay katulad nina Erap, GMA at Binay na may kanya-kanyang political dynasty ay kawawa naman ang taong bayan. KUKURAKUTIN lang ang perang ‘yan..

To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.

Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:

c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City,Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94

editors' picks

advertisement
advertisement