BSP urged to stem peso’s rise

A multi-sectoral group composed of economists, academicians and exporters has urged the Bangko Sentral ng Pilipinas (BSP) to stem the peso’s appreciation in order to bring the exchange rate back to a more acceptable level of P54 to a dollar.

"The threshold for most exporters is P51 to the US dollar. At P52, they will have some margin. But the ideal level so far is P54," said Sergio Ortiz-Luis, president of Philippine Exporters Confederation Inc. (Philexport).

He said exporters number nearly eight million, including those involved in food and agriculture, seaweeds, furniture, home accessories, holiday gifts, consumer accessories, and domestic tourism.

On the other hand, the electronics and information and communications technology (ICT) sectors, the high-valued segment of the export sector, consist of less than a million workers.

University of Asia and the Pacific economics professor Victor Abola said the BSP should intervene in the currency market to stop the appreciation of the peso. "After all, they have been doing that whether they admit or deny it," he added.

Abola also prodded monetary authorities to start buying dollars to increase the country’s foreign currency reserves.

The country’s reserves are estimated at about $15.8 billion, enough to cover four to 4.5 months of imports. "The three-month rule is very obsolete. The monetary authorities may have lost track of their mandate, they are out of sync," Abola said.

However, Asian neighbors have over the years increased their reserves up to 20 months. A bigger foreign currency or dollar reserve cushions the economy from volatile movements of the world currency markets.

Taiwan and Japan are two good examples of Asian nations that brought their reserves to almost 20 months even as they depreciated their respective currencies to protect their export sectors.

Abola also urged the National Government to start paying foreign debts while the peso is strong. The Bureau of Treasury (BTr) has been able to work the bond or debt market to the advantage of the country, reducing new foreign debts, and focusing on the domestic debt markets.

For his part, former Socioeconomic Planning Secretary Cielito Habito, who is now with the Ateneo Center for Economic Research, said the appreciating peso only highlights the weakness of the export structure.

He said the export sector with high domestic value-added components such as those agriculture-based, carrageenan and seaweeds, gold, and domestic tourism are not getting as much support or incentives as against the high-import dependent sector like electronics, ICT and garments sector.

While Habito did not call for BSP intervention on the appreciating peso, he stressed that domestic producers, exporters, domestic tourism, foreign investors, overseas Filipino workers (OFWs) and their families are among the millions of Filipinos that are not gaining from the strong peso.