BSP squanders reserves

DIE HARD III / Herman Tiu Laurel / October 21, 2013 / Daily Tribune

In the midst of the US debt ceiling impasse and the losses it could inflict on the Philippines' GIR (Gross International Reserves) last week, in the report "Top economist chides Bangko Sentral ng Pilipinas for keeping too much GIR" The Tribune writer cited former Budget Secretary Benjamin Diokno's criticism of the BSP holding on to the equivalent to a year's imports and four times the internationally required level of foreign currency reserves the majority of which are in US dollars. One devastating cost is a crash of the dollar if and when a US default occurs. A few days later the BSP's Governor Tetangco and, separately, deputy governor Diwa Gunigundo skirted the implications of Diokno's comment on the GIR in the midst of the crisis.

Diokno's comment reminded me of my previous Tribune articles on the issue. One is my Sept.5, 2012 column "RP: Moody's 'walking debt?'" where I stated that Moody's and other rating's agencies' upgrade of the Philippines is just an enticement for the country and its people to take in more debt when the Philippines is awash in reserves with its $ 83-billion GIR — which in my reckoning is three times more than what the country is required to keep to cover three months imports. The interest on this dollar holding is much lower than the interest on the country's foreign debt and we argued that the huge GIR surplus should immediately be used to pay off the country's foreign debt of $63 billion.

Another article I wrote in early 2011 on BSP mismanagement of RP financial resources, I retrieved from the "Asia Finest Discussion Forum" site entitled "RP wasting $ 30-billion fund." It was prefaced by the site, "The Philippine political leadership and its Financial managers especially those in the BSP better flex their political muscle and show some sovereign testicles instead of being beholden to the Foreign Financial controlling interests led by the Dark cabals." That article I wrote focused on the wasted SDA (Special Deposit Account) that is now about P 1.7 trillion despite BSP reducing interest rates paid on it - from four percent in previous years down to today's 1 percent. In the discussion I touched on the GIR and a comment of former Neda chief Romulo Neri:

"… former Neda Chief Romulo Neri was of the opinion that our dollar reserves of $ 65 billion (2011) is substantially above what the IMF (International Monetary Fund)…. Neri …. believe(s) that 'we can, if we wish to, use perfectly legal means to liberate half of the fund ($30 billion) to jump-start a number of badly needed initiatives…" Neri added that these "… funds outsourced to external managers and invested in longer-dated maturity securities, … The BSP's external fund management program started in 1997 (FVR's time), when a portion of the gross international reserves was invested in long-term instruments. The BSP currently has 10 external fund managers including JP Morgan Chase." These external fund managers do not extend this services for free, of course.

Former Budget Secretary Diokno's comment on the wasteful BSP policy of excessive levels of GIR is actually years behind this columnist and others in raising the questions about the management of the GIR; but better late than never. However, Diokno's timing is good. The US dollar's current crisis highlights the issue for all to ponder and to come up with a responsive new policy. Why are we risking the collapse of about half of the $83-billion GIR if and when the US dollar crashes? Shouldn't the country use this amount to pay of the external debt ASAP? Why are the BSP bosses, Tetangco and Gunigundo insisting otherwise? Are "external fund managers" enjoying "financial pork" with local cohorts?

The questions raised on the BSP's policy on the high level of GIR involves up to P4 trillion of the country's funds and reserves. In interest cost alone it involves hundreds of billions. It involves the major drag on the Philippines' financial independence and economic development — the unnecessary foreign debt the country is carrying. It involves the risk of tens of billions of dollars in reserves that could lose half its value in the course of the US financial crisis. Compared to these issues the current and raging "pork barrel" controversy involves a paltry sum of only tens of billions of pesos, why have the media, the "sow-lons," PeNoy and the public devoted two manic months on the pork barrel controversy and almost nil on the GIR waste and other BSP funds issues?

Is there anyone left in this country, in the legislature or media or public not overwrought with the "pork barrel" scandal that can devote time to asking questions and delving into these BSP issues? The largest plunder is being conducted in the government's financial management sector with the "banksters" of Wall Street and the local financial mafia.

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