Philippines ready to act on adverse effects of strong peso

May. 31, 2007

MANILA — Mitigating measures to help exporters and families of Overseas Filipino Workers (OFWs) cope with the adverse effects of the strong peso are now in place, according to Malacanang.

Executive Secretary Eduardo Ermita said in his weekly press briefing this afternoon that while the government and the Bangko Sentral ng Pilipinas (BSP) will not interfere and let the market determine the exchange rate, it is ready to act to prevent changes that are too fast.

“To slow down the peso, we have been prepaying some of our debts while the BSP has also been accumulating foreign exchange, that is why the gross international reserves are at record levels,” he said.

The peso has been hovering at the P45 to P46 exchange rates against the dollar, reaching levels from as far back as seven years ago following the general trend of appreciating Asian currencies.

To directly help exporters, Ermita said the government has cut exporters fees and has set up an initial P280 million fund to support exporters through the Industrial Guarantee and Loan Fund (IGLF) which will be used to improve product quality, packaging, design and marketing.

“The BSP has also been supporting small and medium exporters through microfinance,” he said. “Ultimately, the best way to help our exporters is to lower power rates, but that is for the medium term.”

Ermita even read the position report of the National Economic and Development Authority (NEDA) and the Department of Finance (DOF) stating that in 2006, exports of goods grew by 14 percent, the fastest in eight years.

He said that the strong peso has also helped reduce interests costs including those for the financing needs of the exporters.

“For OFW remittances, in year 2006, it rose to an all-time high of $12.8 billion while this year, they are up by 24 percent despite the fact that OFW deployment or the number leaving the country has gone down and the foreign direct investments in 2006 expanded by 26 percent,” Ermita pointed out.

“Why am I reading this? Sinasabi maaapektuhan daw ang export and yet despite the improving peso laban sa dollar, export continued to improve,” he explained.

Although families of OFWs may find themselves with less peso equivalent of dollars remitted to them, Ermita pointed out that relatively the strong peso lowered the price of imports notably oil and in the process lowered inflation and prices of commodities. (OPS) (

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