Philippines to Adjust Foreign-Exchange Rules to Spur Outflows

The Philippine central bank will announce the latest changes to its rules on foreign-currency transactions tomorrow to boost demand for dollars, spur capital outflows and slow peso appreciation.

Bangko Sentral ng Pilipinas will hold a briefing at 2:30 p.m. tomorrow on the “6th wave of foreign-exchange liberalization,” it said in an e-mail today. The adjustments in rules, which will allow easier access to foreign exchange, are aimed at encouraging fund outflows, Governor Amando Tetangco told Bloomberg Television on March 28 when he revealed the April timetable for the new rules.

The Philippines, which won its first investment-grade credit ranking from Fitch Ratings last month, is seeking to slow a surge in capital inflows that fueled the biggest peso gain in six months and drove local shares to a record high. Foreign portfolio inflows into the $225 billion economy jumped 79 percent from a year earlier to $7.3 billion in the first quarter, after rising to a 10-year high in 2012.

“To encourage the purchase of dollars, the BSP will probably expand the list of transactions that are not subject to a cap and probably raise some of the caps,” said Rafael Algarra, executive vice president at Security Bank Corp. in Manila. “Right now, there are still more dollars coming in than going out, so the impact of the rules may be minimal at the moment.”

Stronger Peso

The peso rose 0.4 percent to 41.235 per dollar at the close in Manila, according to Tullett Prebon Plc. The currency has gained 3.4 percent in the past 12 months, the second-best performance in the region. Philippine exports fell 15.6 percent in February from a year earlier, the biggest drop since 2011, according to official data.

Bangko Sentral allowed banks to hold more foreign exchange in February 2007 as the peso traded near a six-year high. Since then, it has increased the amount of dollars that companies and individuals can buy or invest overseas without prior regulatory approval and allowed lenders to trade more foreign-currency derivatives.

In March 2012, the monetary authority raised the limit on purchases of the greenback by importers that don’t need to be supported by documents to $500,000 from $50,000. In November 2011, companies were given three months until February 2012 to repay overseas loans that weren’t registered with the central bank with dollars bought from banks.

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