Central bank Governor Perng Fai-nan (彭淮南) said yesterday he suspected most foreign funds parked in Taiwan were intended for currency speculation rather than securities investment, adding that the monetary regulator would closely monitor their movement.
“Foreign investors have injected NT$500 billion [US$15.5 billion] into Taiwan with NT$400 billion of that parked in demand deposits,” Perng told the legislature’s Finance Committee.
Perng said the idle sum was unreasonably high, adding that the level of working capital would make more sense at NT$100 billion.
The governor said he would keep a close eye on the “hot money” and take steps, if necessary, to prevent currency speculation.
The New Taiwan dollar gained 0.02 percent, or NT$0.06, to NT$32.242 against the greenback at the end of trading yesterday, adding to a 2.6 percent rise in the last three months, Taipei Forex Inc data showed.
Chinese Nationalist Party (KMT) Legislator Alex Fai (費鴻泰) said that according to his understanding, US$10 billion in idle funds would be tolerable. Fai urged Perng to take action if idle funds reached US$20 billion, and Perng said he would monitor the situation.
However, the governor dismissed as impractical a suggestion by KMT Legislator Lo Shu-lei (羅淑蕾) that the central bank lower the nation’s foreign exchange reserves denominated in the US dollar and buy more yuan instead.
Perng said it would take a long time before the yuan could become an international reserve currency as it is not freely convertible.
“The limited supply of yuan makes large purchases of the currency infeasible even if doing so is desirable,” he said.
The governor also shrugged off the idea from KMT Legislator Lo Ming-tsai (羅明才) that the bank hike its gold reserves. Perng said that while gold is gaining value at present, it may soon adjust downward and weaken the foreign exchange reserves.
Perng also rebutted media reports that central banks around the world are cutting US dollar reserves because of a glut.
“Those reports are inaccurate,” Perng said. “I checked the IMF data the night before and the reduction so far is only one percentage point.”
The central bank is expected to contribute NT$180 billion to state coffers next year, accounting for 11.6 percent of the central government’s total proposed revenues, its report showed. Perng said the projected figures were similar to this year’s level and he voiced confidence in realizing the goal.
The Ministry of Finance, by contrast, predicted its revenue would be NT$1.225 trillion next year, down 8.95 percent from NT$1.346 trillion this year, as the economy is likely to remain weak.
Meanwhile, the ministry projected spending of NT$193.9 billion, up 4.18 percent from NT$186 billion this year.
Minister of Finance Lee Sush-der (李述德), who also spoke to the committee yesterday, told the legislature he would seek to improve the nation’s finances.
Lee said the ministry had no plan to reinstate a levy on gains from stock transactions. He said an academic on the Cabinet’s Tax Reform Committee floated the idea in a study and the panel would consider it along with other proposals in the coming meeting.
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