The peso’s slide is heart-attack level. But President Marcos said we should not be alarmed.
Don’t panic, he said yesterday, which ironically, given how things are in this nation of 117 million, makes people panic all the more.
BBM’s words, of course, were expected. No president wants to give the impression that a situation – however bad it is – is alarming, but a government that is too complacent certainly makes people more jittery. That’s just how it is.
In reality, though, the situation is quite dire.
As I write this, the local currency has breached the 64-to-the-dollar level when not too long ago, it was unimaginable that the peso would even hit 60.
In the newsroom on Tuesday when the peso crashed past 64, some editors said their earliest memory of the peso was at a single digit, at seven, while mine was 21 to the dollar.
Those were bygone eras.
Here we are now, witnessing the peso’s free fall, no thanks to the US’s eight-month war with Iran and the dollar’s fundamental strength.
Unfortunately, a weakening peso is bad for the country and we will all bear the brunt of it.
Higher electricity rates
For one, we should brace for even higher electricity rates this month. Prepare for bill shocks because some power supply contracts for companies supplying power to our households are in dollars. This means these power generation companies will need more pesos to pay for their contracts.
Another implication is that our imports will cost much more. That includes medicines and other imported goods such as rice.
Oil, of course, will continue to skyrocket. Transport fares will also likely rise.
What can the BSP do?
Perhaps, as a market source said, the Bangko Sentral ng Pilipinas (BSP) can talk to the Bankers Association of the Philippines and ask whether there is truly fundamental demand for dollars or whether speculation is causing the slide.
Simply put, the BSP needs to be more vigilant about dollar purchases, particularly large ones.
It can require more documentation on such big volumes.
We are not yet back in the crisis of the early 1980s – the first Marcos era – but we definitely don’t want to go there when the Philippines had to tighten belts and choose carefully which to spend our thin dollar reserves on – imported medicines or imported fuel.
And while the market understands that the BSP has no foreign exchange target, monetary authorities should also reconsider their explanation of the BSP policy moves.
The source said that monetary authorities should stop saying that rate hikes are not meant to influence the peso-dollar exchange rate, because they do.
The source said that even if the BSP raises interest rates primarily to control inflation, it cannot deny that doing so also affects the peso-dollar exchange rate.
A slower depreciation, in fact, helps the BSP achieve its inflation target.
No less than BBM himself said yesterday that the BSP will do everything it can to defend the peso.
“People can take solace in the fact that our policy toward the peso is to continue to defend the peso as hard as we possibly can,” Marcos said.
“Don’t panic. It is an effect of rising prices of oil and consequently the rising prices of fuel, and its effect on the economy,” he added.
The nation, he noted, has “healthy” foreign exchange reserves.
The country’s foreign exchange buffer, however, already fell to its lowest level in three years in September.
This was due to the BSP’s foreign exchange operations, lower gold valuations and government withdrawals.
Preliminary data from the BSP showed gross international reserves (GIR) declined by 4.6 percent to $100 billion as of end-September from $104.85 billion as of end-August.
GIR is the pool of foreign assets held by the central bank, including gold, foreign currency deposits, securities and other reserve assets, that helps the country pay for imports, settle foreign debt and cushion the economy from external shocks.
The peso’s slide, if not arrested soon enough, will also further aggravate our fiscal position as we would need more pesos to settle our foreign debt.
Double, no, triple whammy it is.
Filipinos can only hope that the situation will improve – sooner than later.
Big businesses can do their share by spending more on new projects that would create jobs and have ripple effects on the economy.
Consumers can help by buying local products. Let’s support our industries, especially now that MSMEs are struggling to stay afloat.
Beyond that, it’s up to the government to save us from this dire situation.
Oh hello, economic team
Don’t panic, BBM said.
But what else can he say? What’s the game plan of his economic team? Speaking of the economic team, what are they doing to address the situation?
In the past, the Philippines largely weathered economic turmoil and averted near economic collapse because the economic team did its job.
Now, with the peso breaching 64 to the dollar and the economy almost at a standstill, Filipinos need more than assurances that everything is under control.
Perhaps, aside from telling us not to panic, BBM should let us know what his economic team is doing so we can survive this current tide.
The really scary thing is how hard this will hit us, ordinary households, and that’s enough reason to panic.
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