MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) continued to operate at a loss – albeit narrower – during the first four months of the year driven by interest payments on deposits and dollar purchases targeted to tame an appreciating peso, official data showed.
BSP, which has been in the red for the past two years, incurred P25.48 billion in losses from January to April, although this was 12.6 percent down from previous year’s P29.16 billion.
Expenses increased 12.2 percent to P37.94 billion, while revenues barely inched up 2.3 percent to P24.28 billion for a net loss of P13.66 billion, figures showed.
Add to that losses from foreign exchange movements worth roughly P12 billion, BSP’s net loss increased 28.8 percent from P19.77 billion in the first quarter.
“This is the cost of stabilizing the Philippine macroeconomy… This underlies the volatility in both the foreign exchange market and bond market,” BSP Deputy Governor Diwa Guinigundo said in a text message.
Interest expenses accounted for the bulk of spending, rising 12.5 percent to P32.03 billion.
BSP pays interest to trillions of money parked at its reverse repurchase facility and special deposit accounts, which it uses to siphon off excess liquidity that may cause inflation to spike.
Aside from this, the central bank also has to manage a strengthening peso by buying dollars in dips. Data showed a total of P11.82 billion in foreign exchange losses, although this was down 38.05 percent year-on-year.
To ensure that the peso maintains its external competitiveness…, the Bangko Sentral has to maintain its presence in the foreign exchange market and continue to recalibrate policy rate to siphon off any excess liquidity,” Guinigundo explained.
As of the third quarter, the peso has appreciated by 4.88 percent against the dollar, data showed. On Tuesday, it opened 41.43 to a dollar, moving sideways from its close of 41.45 last Monday.
A strong peso, while making imports cheaper, also trims the value of dollar remittances and export earnings when converted to local currency.
On the flipside, revenues came primarily in the form of interest income, which actually dropped 11.8 percent to P13.61 billion from P15.22 billion last year.