Monetary Board Ends Review of Foreign Exchange Policies; Liberalization Seen

Article excerpt

MANILA, Philippines - The Bangko Sentral ng Pilipinas's (BSP) Monetary Board has just concluded reviews of the latest round of revisions to the foreign exchange policies that will liberalize restrictions on capital inflows.

Monetary Board sources said the new circular has been approved but is waiting for an official statement from the BSP Governor for its release to the public. BSP Governor Amando M. Tetangco Jr. has said the new measures liberalizing foreign exchange policies will be released before December.

One of the salient features of the new circular, aside from liberalizing documentary requirements to allow banks to purchase dollars from local banks to pay its foreign currency loans, is allowing banks a window of opportunity to transact unrestricted foreign exchange transactions for a certain period of time even without registering foreign loans with the BSP. This will effectively stem the rise of the peso vis-a-vis the US dollar and also increase demand for foreign exchange.

As in past measures to open up the foreign exchange policies, the new circular will also cover other foreign exchange transactions that were not included in previous revisions of the last five years.

Last year, the BSP further eased foreign exchange policy restrictions by allowing banks to engage in so-called "constructive remittances" to encourage more outward investments.

Circular No. 692 relaxed the approval conditions for banks wanting to establish or acquire subsidiaries or affiliates abroad and allow the dividends to be reinvested with foreign correspondent banks based overseas. …