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BSP looks at further easing of FX rules

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WORK is under way for fresh easing of foreign exchange restrictions, with changes being prepared by the central bank meant to simplify the entry and withdrawal of investments.

“It is about further liberalization of investment rules… Basically it is similar to what we did for external debt — we want to make it easy for investments to come in,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. told reporters recently.

Last month, the BSP announced that banks will no longer have to seek central bank approval to convert foreign currency-denominated loans to peso.

The central bank has been relaxing restrictions on currency conversion as part of overall government efforts to improve the ease of doing business. Such changes are also meant to encourage the public to transact with banks rather than informal channels.

Mr. Espenilla declined to give details, but said the latest wave of easing will tweak the “administrative requirement” of reporting investments and will simplify the process for repatriating investments held by foreign businesses.

He said the BSP has been soliciting bank comments on the planned changes.

Foreign direct investments reached $2.175 billion in the first quarter, 43.5% more than the $1.516 billion the Philippines got in 2017’s first three months on the back of sustained confidence in the country’s growth prospects.

More flighty foreign capital also entered the country as of April with $6.396-billion inflows outweighing $5.395 billion in withdrawn portfolio funds, according to latest available BSP data.

The central bank has been liberalizing foreign exchange rules since 2007.

Significant changes include a higher limit for over-the-counter dollar purchases at $500,000 for individuals and $1 million for companies.

Dollars acquired through Philippine lenders may likewise be kept as dollar deposits with the banks concerned.

Mr. Espenilla has cited the need to pursue reforms on currency trading rules, saying that stiff registration requirements set back in the 1970s were necessary at a time dollars had to be “rationed” given limited supply.

But liquidity has improved since then, with banks now well-armed with cash to service both peso and dollar transactions. — Melissa Luz T. Lopez