$ 378 million deficit in the same quarter last year. meanwhile, remittances from overseas filipino workers sustained double - digit growths. inflows for the month of june 2005 posted a 32. 1 percent growth ( us $ 935 million ) compared to same month last year. the cumulative level of remittances for the first semester reached us $ 4. 9 billion, 21. 5 percent higher than a year ago ’ s level. this is due to increased deployment of higher - paid skilled professionals and improved access to formal remittance channels. accordingly, we continue to enjoy a comfortable reserve position with our gross international reserves ( gir ) at us $ 17. 7 billion in july 2005. impetus for capital market reform a growing economy, such as ours, requires a steady flow of financing from both local and foreign sources. in sustaining this development, the economy needs a healthy financial system. a financial system that is built upon two strong pillars : a robust banking system and a fully - functioning capital market. why is it necessary to develop our domestic capital market simultaneous with the restructuring of the banking system? a fully developed capital market can stimulate domestic savings and provide investment opportunities. compared to our asian neighbors like malaysia and thailand, we have a smaller savings - to - gdp ratio at 21 percent. domestic savings onshore are channeled to productive output crucial to economic development like infrastructure projects. a sound capital market also improves the financial environment with the offer of alternative financial instruments. at present, government papers dominate the local capital market with minimal alternative for other financial instruments. a marked difference with other countries where private debt issuance is far more significant. also, the 1997 asian financial crisis was a painful reminder of our vulnerability to external shocks due to our excessive dependence on the local banking system. bsp initiatives cognizant of this challenge, bangko sentral has laid down a broad range of financial system reforms to complement and accelerate the development of the capital market. we initiated the groundwork through asset clean - up of banks to restore the credit supply to the economy. for the first semester of 2005, the non - performing loan ( npl ) ratio of universal and commercial banks1 was back to a single - digit level at 9. 2 percent. this is a reversal from a peak of 18. 8 percent in october 2001 due to asset dispositions under the special purpose vehicle ( spv ) law. hopefully, we can restore asset quality to pre - crisis levels once the extension

amando m tetangco, jr : capital market - a cornerstone of bsp financial reform agenda speech by mr amando m tetangco, governor of the central bank of the philippines, to the investment house association of the philippines ( ihap ), manila, 23 august 2005. * * * distinguished officers and members of the investment house association of the philippines ( ihap ), ladies and gentlemen, good afternoon! allow me to first of all congratulate the incoming board of directors and officers of ihap. let me also thank you for this invitation to be your keynote speaker and inducting officer. since 1973, investment houses under the ihap umbrella have carved their place in the economy as important financial intermediaries. you are therefore a vital partner of the bsp in building a more resilient and efficient financial system and a more expedient capital market development. more recently, your participation in establishing the fixed income exchange is one manifestation of your significant contribution toward taking the steps to develop the local securities market. former bsp governor paeng buenaventura has laid down the blueprint of capital market development as a vital component of the country ’ s financial reform agenda for sustainable economic growth. as his successor, i am equally committed to ensure the continuity and consistency of our policy reforms. this afternoon, i will discuss the policies and programs of bsp on capital market development. economic overview to put things in perspective, let me first give you an assessment of the economy. overall, our economic fundamentals remain generally sound in the midst of political noise. for the first quarter of 2005, the country ’ s gross domestic product ( gdp ) grew by 4. 6 percent and driven primarily by growth in the services and industrial sectors. bsp ’ s prudent monetary policy, anchored on inflation targeting, kept key overnight policy rates steady. ample liquidity in the market and improvement in the government ’ s fiscal position served to push the yields of bellwether 91 - day treasury bill rates down to 5. 6 percent. headline inflation decelerated to 7. 1 percent in july, posting an average of 8. 2 percent for the first seven months of the year. our peso has been relatively resilient, trading below the p56 / us $ level. in the external sector, the balance of payments ( bop ) posted a surplus of us $ 783 million for the first quarter of 2005l this is a turnaround from the us