High RP Forex reserves

The Governor of the Bangko Sentral ng Pilipinas (BSP), Armando Tetangco, predicted that end-2010 gross international reserves (GIR) might reach $60 B, an all time high. Actual GIR as of end-October 2010 already reached $56.8 B.

There are various factors why the country’s foreign exchange (forex) reserves have been accelerating recently. One is the high inflows from OFWs’ remittances. Two, high inflow of portfolio investments (or “hot money”) in the stockmarket and related equity investments. The economic uncertainties in the US and Europe help push some investments out of those economies. Three is the rebound of exports earnings plus increasing earnings of business process outsourcing (BPO) firms.

With high GIR, the BSP and the Executive branch should consider retiring more public foreign debt to reduce interest payment burden, the single biggest item in the annual budget of the national government.

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