The Philippine central bank BSP is likely to increase the gross international reserves this year to 37 billion U.S. dollars to mitigate the impact of the peso appreciation, officials said on Thursday.
Last year, the BSP incurred 84 billion pesos (2.06 billion dollars) of foreign exchange loss in trying to reduce the fluctuations in the foreign exchange rate, Philippine News Agency reported, citing BSP Deputy Governor Diwa Gunigundo.
Gunigundo said the BSP will continue to buy dollars so that they can prevent unpredictable volatility for the local economy.
At present, the BSP has 34 billion dollars worth of gross international reserves, 88 percent of which are denominated in U.S. dollars.
"Businessmen want more predictable environment and that is the mandate for the BSP, to maintain price stability conducive to a balanced and sustainable growth of the economy," Gunigundo said.
The high U.S. dollar reserves helps to manage inflation and reduces cost of borrowings abroad in addition to the improving macroeconomic fundamentals of the country, he added.
"The 88 percent of GIR (gross international reserves) is part of the foreign investments and are in fact broken down into investments of various instruments and currencies. However, most of our trade are denominated in dollars so we really have no choice, considering that the Philippines is currently experiencing increase in market confidence, thus the inflow of dollars," said the deputy governor.
He added that 51 percent of remittances sent by millions of overseas Filipino workers for the country are denominated in U.S. dollars.
Gunigundo said he sees a lower peso appreciation for this year compared to 2007.
There will be mitigants like investments in other currencies such as Euros and Canadian dollars.
He said the BSP is looking into reduction of the 88-percent share of the U.S. dollars as investments in different currencies are said to be increasing.
The appreciation of the peso against the U.S. dollar started in the second half of 2005.
From the monthly average of 56.156 pesos to a U.S. dollar in September 2005, the peso steadily gained strength against the dollar to 40.560 pesos against a U.S. dollar at present.
Source:Xinhua
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