MANILA, Philippines—The Bangko Sentral ng Pilipinas ended 2007 with a net loss of P87 billion, a reversal of the P4.79-billion net profit in 2006, as foreign exchange losses widened while the peso strengthened against the dollar to become Asia’s best performing currency.

Based on unaudited financial results recently reported to the BSP’s policy-making Monetary Board, the financial hemorrhage was on account of about P113 billion in foreign exchange losses, top BSP sources said. The yearend losses widened further from the P62.5-billion net loss recorded from January to November.

While the central bank’s foreign exchange reserves rose to a record-high $33.7 billion in 2007 from $22.97 billion the year before, it was forced to buy more dollars from the open market even when the greenback was on a freefall. Without such intervention, the peso would have appreciated even faster.

The local currency surged 18.8 percent against the dollar in 2007 on the back of strong remittances from overseas Filipino workers and foreign investment inflows.

Asked whether the local central bank would adopt new measures to boost its bottom line this year, BSP Governor Amando Tetangco Jr. said: “Let me reiterate that profit is not the BSP’s overriding consideration for operations, although it is important.”

“Our primary mandate is the attainment of price stability. As I have also said in the past, achieving this mandate comes at a cost. Nonetheless, we are mindful of these considerations and endeavor to use the most cost-effective tools available to achieve the objective,” Tetangco said. He said central banks do not make money during the good times when the currency is strengthening.

“It’s because they will be long (on a buying position) on foreign exchange because they will be holding the reserves. Also, if the banking system is stable and sound, the banks don’t have to borrow from the central bank. So during good times when everyone else is making money, central banks usually don’t make money,” the BSP chief explained.

The BSP, however, is finally set to receive within the year the P40 billion in remaining seed capital that the government was required to infuse when an independent central bank was created by Congress in 1993.

Economic managers have approved a financial sector stabilization program to raise P40 billion to recapitalize the BSP using a special purpose trust (SPT). Under the scheme, the government will set up the SPT to float peso-denominated bonds of P20 billion each, in two tranches, backed by the state’s written commitment to provide budget allocations over the next 10 years.(By Doris Dumlao, Inquirer News Service)