The Philippine Central Bank or BSP (Bangko Sentral ng Pilipinas) will prepay in April a foreign loan of 500 million U.S. dollars, six months ahead of its maturity, expecting to save 5.5 million dollars after doing so, BSP Governor Amando Tetangco Jr. said on Wednesday.

The loan amount involves 395.5 million term loan and 104.5 floating rate notes obtained in October 2003 from a syndicate of banks as part of the central bank's borrowing program, according to the BSP.

Tetangco said the central bank is making the prepayment to take advantage of the strong liquidity in the market.

The payment is enabled by dollars sourced at the domestic market, or the BSP's healthy dollar reserves, according to Tetangco, which stood at record-high of 20.6 billion dollars in end-February, boosted by inflows from overseas workers' remittances and foreign investments.

The inflows, which have been behind the surge of the peso in recent weeks, have improved the external liquidity position of the BSP, Tetangco said.

Monetary officials expect continued flows of foreign exchange as investors are encouraged by the country's improving fiscal position with the reform in the value-added tax.

The BSP serviced 800-million-dollar foreign debts in 2005 and a BSP official said the central bank will service the "same amount or lower" this year.

The BSP is expecting its reserves to stay at comfortable levels of 18 billion dollars this year.

Source: Xinhua