The coalition of dollar earners and their allies were meeting at the Philippine Exporters Confederation, Inc. boardroom last Wednesday when the peso-dollar rate hit a five-year high of P40 to $1. The local currency had appreciated in value by three pesos to the dollar in less than three months.
The atmosphere was somber as coalition members tried to find ways to stop the peso’s rampage before it wrecked the few remaining growth-inducing segments of the economy — exports and OFW remittances.
At the meeting was Eddie Gana, a member of the Financial Executives Institute of the Philippines, who is also a consultant to Sen. Sergio Osmeña III, chairman of the Senate’s banking and finance committee.
After he was shown proposed amendments to the pending bill in Congress seeking to amend the charter of the Bangko Sentral ng Pilipinas (BSP) so the bank’s role would be expanded beyond simply inflation control, Gana said the proposal will not pass before Congress goes on election campaign recess in February.
By then, it may be too late to save what needs saving. The proverbial starving carabao may, by then, be dead before the first rains grow grass on the parched land.
National scientist and former Dean of the UP School of Economics Raul Fabella summed up the situation succinctly: When the exchange rate hits below P39 to $1, “it will be Armageddon.”
In the Bible, Armageddon was the end of the world. That kind of ending was also depicted in the movie 2012, the supposed end of the Mayan calendar.
Fabella, a long-time advocate of managing the peso-dollar rate the way our richer neighbors have been managing their local currencies, may have been too pessimistic in his conclusions. Known to survive almost on nothing, Filipinos may still be alive by 2013.
Still, nobody is cheering the strong peso, bandied by the past administration to reflect a strong economy and a strong republic. It is now common knowledge that the Philippine economy is Asia’s laggard, in the same league as Laos and Myanmar.
Manufacturers for the domestic market are now exposed to one-sided competition with imports cheapened by the strong peso. Filipino farmers are not cheering either as they lose out to cheap rice, onions and carrots, imported or smuggled. Neither are the Bureau of Customs and the Bureau of Internal Revenue happy as cheaper imports erode their tax take.
The bleeding is most telling when it comes to domestic helpers (DH) in Hong Kong who earn an average $500 a month, says Lito Soriano, representative of OFWs in the Competitive Currency Forum. When a DH gets his/her pay this November, its peso equivalent will be P1,500 less than three months back. That is equivalent to a cavan of rice every month lost to the strengthening peso.
Considering there are about 12 million OFWs sending home a total of $2 billion each month, the situation affects one of every two families in the Philippines. When more than half of a nation’s population is hurt by a wrong policy, national interest dictates it must be corrected.
A strong peso is hurting everyone, except importers and smugglers. And yet, top officials of the BSP insist on allowing market forces to dictate the peso-dollar rate. These officials are keeping banks happy while losing close to P100 billion this year to keep OFW remittances out of circulation.
Armageddon for the Philippine economy as a result of the foreign exchange rate may not be as dramatic as the movie 2012 depicted. But its long-haul impact will be just as devastating.