The Perky Peso
The ‘peso,’ the Philippine currency (denoted by P), is currently valued around 50 to one US dollar ($1.00). Monetary policy and the control of foreign exchange system in the Philippines is in the hands of the central bank, the Bangko Sentral ng Pilipinas (BSP).
Imports and Exports
The value of the peso is tied closely to the fate of the Philippines’ exports and the hardships of local industries that rely on imported materials. The more the peso declines in value compared to foreign currencies, such as the US dollar, the German mark and the British pound, the more sales value (in peso) are gained by those who sell their goods to these countries. But even exporters lose when the peso depreciates if their export products are dependent on imported materials.
The decline of the peso started in the 1970s with the successive oil-price increases by petroleum exporting countries, which affected the rest of the world. The US dollar devalued, and along with it the gold content of the peso (International Economics, 2000). Countries dependent on imported crude, such as the Philippines, were also those who easily managed to borrow hard currencies from foreign governments and banks. The ease with which lending was carried out in those decades contributed to the debt burden of many Third World countries, including the Philippines, at the end of the century and the loss of their current purchasing power. As the peso falls, the Philippine foreign debt multiplies exponentially because most interests for the loans were not fixed, but variable.
|The ease with which lending was carried out in those decades contributed to the debt burden of many Third World countries, including the Philippines||
The peso has seen countless devaluation under the Marcos regime and succeeding administrations. In the past the authorities imposed a fixed foreign exchange rate and maintained a multiple rate structure to govern export, imports and foreign debts. In 1984, at the height of the country’s political and economic crises, the multiple rate structure was abolished and the peso was allowed to fluctuate freely. It was also this year when the Black Market was officially recognized as a major source of foreign exchange (International Economics, 2000) (see also the Section on the Underground Economy).
Every time the peso falls against the dollar, whether or not it is induced by a domestic political problem or an external financial problem, prices of domestic goods especially fuel and basic commodities, including tuition fees, immediately increase, to the detriment of the masses. It also says a lot about the Philippines’ productive infrastructure; the best preparation for any external shock is having a competitive industry and a sufficient agricultural base. The Philippines is susceptible to meltdowns and the volatility of the financial markets as it does not yet have an adequate production capability. During the first half of 2002, the peso is seen as stabilizing as more goods are being exported and overseas Filipino workers are sending in more money to their relatives.
For daily and weekly Philippine Domestic Interest Rate, Foreign Interest Rate, and the Exchange Rate, you can click on – http://www.bsp.gov.ph/Statistics/stats_SEFI.htm
– Photo source: Bangko Sentral ng Pilipinas