BSP enhances currency supply forecasting

BSP enhances currency supply forecasting

By LEE C. CHIPONGIAN

July 3, 2011, 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has improved its forecasting of the monthly currency in circulation to ensure the money system will always have sufficient supply of banknotes and coins.

Last year, the BSP estimated that currency in circulation would reach P653 billion and has instituted programs and targets to meet this projected demand.

When the year was over and the tally was made, the actual currency in circulation was 7.4 percent lower than forecast of P601 billion, according to sources.

To better project demand for currency, the central bank has formulated new models for its monthly currency in circulation forecasting.

The same sources said the new model, based on initial testing, is more accurate and will be used starting next year. In 2010, the BSP met the currency demand and banks' banknotes requirements, so all withdrawals were serviced. This ensured that there was a normal currency supply. Sources, however, said there was an artificial shortfall in the coin supply which the BSP easily resolved during the period. Based on a BSP report, "the actual level of buffer stock (currency) continued to exceed requirements."

The buffer stock in 2010 was comfortably higher than demand, especially for banknotes. As for coins, in terms of number of pieces, reserves did not meet demand.

Still, the BSP continues to find ways to resolve and avert coin supply shortfalls owing to high demand for coins from banks.

In a similar report, the BSP said it has averted a projected shortfall in the supply of coins last year, and these supply constraints resulted from either the public’s "hoarding" of coins or delivery delays from outsourced mint makers. It noted that an artificial shortage of coins may occur because of the common practice by people of keeping coins idle in bank vaults, drawers, piggy banks, and not re-circulating them.

The volume of coins released in 2010 was lower than demand, which for banks located in Metro Manila, was 1.18 billion pieces.

The BSP had enough supply of 10-piso coins but had a slight shortfall in the smaller coin denominations. The central bank is implementing measures to avoid artificial scarcity of coins in the future.

During consultation meetings with BSP regional offices, one of the causes for the poor re-circulation of coins was the use of coins as tokens for so-called "automated tubig machines" video games and videoke machines. Coins were also used as accessories, kept inside churches, piggy banks, and even melted for metals.