The Philippine central bank’s unrealized gains reached almost P1 trillion by the end of August this year, according to the latest data.
The Bangko Sentral ng Pilipinas (BSP) is accumulating unrealized gains due to its participation in the foreign exchange market. The central bank has been a net seller of US dollars, which has contributed to the peso's current weakness at the mid-P58 level to the US dollar.
BSP statistics showed that for the first eight months of the year, the BSP registered unrealized gains of P981.6 billion. This was 25 percent higher than the same period last year, when unrealized gains were P784 billion.
To ensure exchange rate stability, the BSP maintains a presence in the spot market to manage volatility.
The BSP has a flexible and free-floating exchange rate policy, meaning the exchange rate is market-determined. However, the BSP is prepared to participate in the spot market to ensure orderly market conditions and reduce excessive short-term volatility.
The BSP books unrealized or realized gains or losses based on changes in price and exchange rates.
Last year, the BSP registered unrealized gains of P800.75 billion, an increase of 16.17 percent compared to P689.25 billion in 2022. Under BSP law, unrealized gains are referred to as the revaluation of foreign currency accounts.
A report indicated that the BSP was mostly a net buyer of US dollars in 2023. The BSP net purchased US dollars from January to April last year, and again in July, November, and December. However, for the months of May, August, September, and October, the BSP was a net seller of US dollars.
As of end-August this year, the central bank’s foreign exchange (FX) gains declined by 34.55 percent to P28.6 billion, compared to P43.7 billion last year. FX gains are realized gains from fluctuations in FX rates arising from the BSP’s foreign currency-denominated transactions.
Overall, the BSP reported a higher net income of P105.6 billion in the first eight months of 2024, up 361 percent from P22.9 billion during the same period last year.
The BSP is one of the mandated seed funders of the Maharlika Investment Corp. Despite being unable to build up its capitalization because the sovereign fund diverted its dividends as seed money, the BSP appears comfortable with its income and accounts due to its unrealized gains.
The BSP’s capital remains at only P60 billion, short of the P200 billion mandated by the BSP Charter as amended in 2019. The law that created the Maharlika Investment Fund requires the BSP to funnel its dividends as seed money to the wealth fund. This postpones the BSP's capitalization, but BSP officials believe they can afford the delay of the capital increase.