These controls are (1) a fixed peso-dollar exchange rate, (2) a cap on interest rates, and (3) a 90-day holding period and exit tax on withdrawals of foreign portfolio investments.
CREBA submitted its proposals to President Arroyo, Senate President Franklin M. Drilon, House Speaker Jose de Venecia, and Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura. It asked government to seriously consider the proposals at the earliest possible time and include these in the contingency plan to be carried out the moment war finally breaks out.
CREBA stressed, however, that these proposed controls are meant to be temporary and should be lifted at the first sign of global normalcy.
In a statement, CREBA said:
"The US-Iraq war is expected to result in a global economic meltdown, considering the world’s dependence on the Middle East oil supply, and the uncertainties regarding worldwide retributive action by extremists.
"We, therefore, urge government now while there is still time to prepare a contingency plan, to seriously consider imposing monetary controls as an economic safety net that may be readily implemented the moment war finally breaks out.
"That government is working to ensure that sufficient stock of rice and other essential commodities would be available to our people, is reassuring but, to our mind, inadequate.
"Of primordial importance is to protect our economy against monetary instability. Even now, oil prices are at an all-time high and the peso is at an all-time low.
"A further depreciation of the peso would be a disaster for our country – underdeveloped as it is and not only dependent on importation of essential commodities particularly oil, but also heavily saddled with foreign debt. It would aggravate our meager foreign exchange reserves, and further bloat our fiscal deficit by raising the foreign debt servicing burden.
"Worse, it would result in another price spiral of oil goods and services – a situation with which majority of our people simply can no longer cope.
"Aggravating matters, a surge in interest rates inevitably follows a peso depreciation. Businesses – caught in the squeeze of a depressed market at one end, and high power costs, high financing costs and high cost of all other inputs at the other – would be left with no option but to retrench, if not to close shop.
"The economic horrors of the 1997 economic meltdown caused by speculative attacks on the peso are still fresh in our minds – to this time our economy is still down on its knees and our people are wallowing in extreme poverty.
"The monetary controls we propose are meant to be temporary. At the first sign of normalcy, government can always revert to its policy of allowing market forces to dictate our foreign exchange and interest rates," Creba added.