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Partly because it is a net seller of US dollars in the exchange market, the Bangko Sentral ng Pilipinas (BSP) reported unrealized gains of ₱1.235 trillion as of the end of November 2024, up by 70 percent from same period in 2023 of ₱727.9 billion.
Under the BSP law, unrealized gains are called revaluation of foreign currency accounts. It used to be called revaluation of international reserves. In peso terms, as of end-November last year, the country’s reserves totaled ₱6.318 trillion.
The International Monetary Fund (IMF) defined realized gains and losses as “profits or losses arising from completed transactions.” On the other hand, unrealized revaluation gains and losses are profits or losses “that have occurred more commonly known as ‘on paper’, but the relevant closing out transactions have not been completed.”
The BSP’s unrealized gains first breached the ₱1-trillion mark in October last year. In 2023, the BSP posted smaller unrealized gains of ₱800.75 billion from ₱689.25 billion in 2022.
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 seems comfortable with its income and accounts because it has substantial unrealized gains.
Under the amended central bank charter, the BSP is supposed to increase its capital from ₱50 billion to ₱200 billion. The Maharlika law temporarily halted the BSP’s capital-raising plans.
Meanwhile, to ensure exchange rate stability, the BSP maintains a presence in the spot market to manage volatility. As of the first week of March 2025, the peso was trading at the mid-₱57 level to the US dollar.
While BSP Governor Eli M. Remolona Jr. has often said that the central bank does not intervene in the exchange market on a daily basis, the BSP does pull its weight when the peso is under a lot of stress.
The BSP’s currency intervention affects the country’s revaluation of international reserves because by definition, unrealized gains literally come from the fact that the peso has depreciated.
The BSP books unrealized or realized gains or losses based on changes in price and exchange rates.
The BSP continues to maintain a flexible and free-floating exchange rate policy, which means it is market-determined. However, it is prepared to participate in the spot market to ensure orderly market conditions and to reduce excessive short-term volatility.
As of end-November 2024, the BSP reported a net income of ₱113.6 billion, up by 387 percent from same period in 2023 of ₱23.3 billion.
The BSP also registered net gains from foreign exchange rate fluctuation of ₱38.6 billion during the period, lower compared to the previous year’s ₱55 billion.
The latest central bank total assets stood at ₱8.053 trillion, up by 7.5 percent year-on-year, while total liabilities also increased 5.8 percent to ₱7.79 trillion.
BSP assets are boosted by the country’s international reserves and central bank holdings of domestic securities. Total liabilities, on the other hand, are higher due to more currency in circulation, obligations from reverse repurchase facility, and revaluation of foreign currency accounts or unrealized gains.
