Exporters demand BSP act to rein in peso

Exporters are again up in arms over the surging strength of the peso and expectations that the local currency will further appreciate against the US dollar as a result of worsening problems in the American economy as they urged the Bangko Sentral ng Pilipinas (BSP) to take decisive actions to stem the the peso value.

The Philippine Exporters Confederation (Philexport) said the strong peso is hurting every productive segment of the domestic economy.

The peso closed yesterday stronger at 42.42 per dollar from 42.64 last Friday and bankers are forecasting the currency to move within the 40 per dollar level before the end of the year.

The appeal was made to Monetary Board member Peter Favila and his team of BSP executives in a dialog between export industry leaders, several economists and supporters of overseas Filipino workers last week.

Economists who were at the meeting pointed out to the BSP that in East Asia where exports have sustained rapid growth, most other central banks have effectively managed their exchange rates.

Only the Philippines has gloated over the strong peso, equating it to a strong economy which is not true, argued the export leader-trustees of Philexport.

In fact, the economy has emerged as one of the weakest in the Asian region with the highest unemployment and underemployment rate.

University of the Philippines School of Economics professor Benjamin Diokno particularly called for the country’s financial managers to stop borrowing dollars, start taxing portfolio investments, and announce that interest rates on bank loans be suspended indefinitely.

University of Asia and the Pacific professor Victor Abola, on the other hand, reminded the BSP that inflation control is not the sole mandate of the BSP. He told them that in framing the BSP charter, the Senate had included balanced and sustained economic growth as part of BSP’s purpose for being.

“If BSP’s inflation control fixation results in keeping most Filipinos poor, it is not doing its other mandate of promoting balanced and sustained economic growth,” Abola said.

In the presentation of facts and figures on the strong peso’s impact in the local front, most export industries, including electronics, had shown they suffered the burden of the strong peso. Indigenous exports that use mainly local raw materials and OFWs are the hardest hit, while import substituting industries and farmers are also at the losing end of the strong peso regime.

The economic slowdown that comes with a strong peso coupled with the fact that the United States has not recovered from its economic woes, also hurt government with huge revenue losses, Abola had pointed out.

Exporter-economist Calixto Chikiamco said the timing for adopting a growth-supporting policy regime on the exchange rate is just right, as the banking system, including the BSP, is swimming in huge cash.

It was shown during the dialog that BSP’s vaults are awash with dollar reserves that are more than enough to pay loans that come due, with special deposit accounts from private banks that are close to P2 trillion, and a healthy balance of payments.

OFW champion Lito Soriano had a more dramatic proposal, that of depreciating the peso to levels exporters and OFWs are comfortable with, then pegging it at that level the way the more prosperous nations in East Asia led by Japan and China are doing. –Ayen Infante, Daily Tribune