FOREX BOOST. The Bangko Sentral ng Pilipinas' (BSP) looming repurchase agreement or repo with the Federal Reserve is expected to increase the Philippines' dollar reserves. BSP Governor Felipe Medalla said nothing is final yet for the repo but said it will materialize this year. (PNA file photo)
MANILA — The country’s United States dollar reserves are expected to get a boost from the planned repurchase agreement between the Bangko Sentral ng Pilipinas (BSP) and the Federal Reserve.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort told the Philippine News Agency that the repurchase agreement or repo “would help add to the country's available US dollar liquidity/funding facilities, if needed.”
“This would complement US dollar funding/swap agreements of the country with other central banks in Asia/globally, thereby adding to the buffer/cushion for the peso exchange rate, if needed, based on existing global best practices as countries collectively learned from the lessons of the Asian financial crisis in the late 1990s/past crisis periods,” he said.
Ricafort said the agreement will increase the country’s dollar reserves “by using US government bonds/Treasuries holdings/investments, for instance, as collateral (without the need of selling them outright in the market to get US dollar funds, if necessary).”
Repo is a short-term securities agreement between a central bank and another party, with the former buying it back at a slightly higher price.
Earlier, BSP Governor Felipe Medalla said they were considering an overnight repo agreement with the Fed but he declined to give any amount.
He said the deal would materialize this year but did not give specifics.
He added the BSP has this option even before but has not tapped this in the past. (PNA)
