Entrepreneurial Farmer

Ambrosio R. Villorente

BSP Rediscounts Loans To Banks

Prinz P. Magtulis, Philstar News Service reported ”the Loans disbursed by the Bangko Sentral ng Pilipinas (BSP) to banks surged in the first seven months of the year on the back of strong demand for credit amid a growing economy.”

The commercial, thrift and rural banks availed a total of P25.295 billion in loans in its peso rediscount facility from January to July 2012, up 80.3 percent from the P14.027 billion extended last year, BSP report revealed.

The rediscount facility allows banks to meet their short-term liquidity requirements by using their clients’ promissory notes as collateral. These loans, in turn, are expected to finance loans by end-users, it explained.

The BSP rediscounting facility also serves as an avenue to control the volume of money in the financial system by limiting loans during period of faster inflation and providing more credit in times of slower growth.

As of July, 76.6 percent of the peso rediscount loans were used to finance commercial operations, while 3.4 percent went to agricultural and industrial needs, data showed.

A fifth, “other credits” with bank loans going to capital expenditures (6.8 percent), permanent working capital (2.6 percent), housing (3.2 percent) and other services (7.4 percent).

According to Magtulis, dollar loans for exporters dropped during the seven-month period, BSP figures showed.

Under the Exporters Dollar and Yen Rediscount Facility, a total of $110.5 million were availed by 27 exporters from January to July 2012, down by a 10th from the $122.9 million granted a year ago.

No yen availments were recorded during the period.

Analysts have said demand for peso-denominated loans are expected to fulfill the requirements of a growing economy. The Philippine economy grew by a stellar 6.4 percent in the first quarter. 

OFW Inflows Reach $1.81 Billion In June

Remittances from overseas Filipino workers (OFWs) reached $1.811 billion in June, up 4.2 percent from a year-ago level, the BSP reported last week.

The latest figure brought the first semester tally to $10.128 billion, up 5.1 percent from last year’s level.

According to the BSP, the monthly growth was the slowest since March last year’s 4.1 percent. Nevertheless, six-month expansion was still better than the BSP’s five-percent target for the year.

“The sustained growth in the deployment of OFWs is the key contributory factor to the upswing seen in remittance flows,” the BSP stressed.

“Another factor that helped shore up remittances was the continued expansion of bank and non-bank remittance providers that enabled the wider capture of a larger share of the global remittance market,” BSP added.

The Philippine Overseas Employment Administration approved job orders which reached 472,261 as of July 2012, 35 percent of which consisted of processed job orders for services, professional, technical and production related workers.

The statement said six-month remittances from land-based workers rose 2.8 percent to $7.8 billion, while those from seafarers increased 13.6 percent to $2.3 billion.

The US remains the leading source of remittances, accounting for 42.8 percent of the total, the statement said. Canada followed with (9.6 percent), Saudi Arabia (7.6 percent), Japan (five percent), United Kingdom (4.8 percent), Singapore (4.2 percent), and the United Arab Emirates (4.1 percent).

Prakriti Sofat, regional economist at Barclays Capital, said remittances would likely grow as BSP projected this year, giving the government enough reason to prepay offshore loans to tame the appreciation of the peso against the dollar, which increase by 5.1 percent as of July 2012.

The STAR yesterday reported the government is again looking at prepaying its external loans after shelving similar plan in late 2010. Prepayment will allow for dollar outflows, counterbalancing huge inflows which tend to make the peso stronger.

A strong local currency, while it helps make imports become more affordable, causes Philippine products abroad to become more expensive, trimming export earnings. It also reduces the value of remittances earned from overseas Filipinos as Prinz P. Magtulis of Philstar News Service reported. /MP