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August 8, 2008

Philippines’ end-July reserves close to forecast
The Philippines’ gross international reserves ends at $36.9 billion in July, almost reaching the top end of the central bank’s forecast for year-end reserves of $35-37 billion, reported Reuters on Thursday.

The monetary authority said on Thursday the slight increase in July from $36.7 billion in June was supported by proceeds from the sale of government power assets and the central bank’s income from investments abroad.

Privatisation proceeds are helping to prop up the Southeast Asian country’s reserves at a time when the central bank has been selling dollars to support the peso, which has been hit by concerns about slowing economic growth and accelerating inflation.

The currency is hovering around two-month highs against the dollar due to a sharp drop in oil prices, which offers some relief to an economy dependent on imported fuel.

While the central bank’s international reserves are rising, its holdings of foreign currencies through forward swaps fell to about $4.3 billion at the end of June from $6.3 billion at the end of May.

The central bank’s currency swaps serve as a foreign exchange buffer for the monetary authority, as these represent additional foreign reserves the central bank would hold when the swap contracts are unwound.

Central bank sources have said the decline in the swaps, from a record peak of $13 billion at the start of the year, was one of the reasons the central bank decided to tap a $500 million short-term loan from the Bank for International Settlements.

The current level of international reserves can cover six months of imports of goods and payments of income and services. It is also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.0 times based on residual maturity.

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