Pro-OFW group warns of PHL's ‘distorted-growth crisis’
The Philippines will stay poor and its people will become poorer under a strong peso regime.
This conclusion was drafted and circulated in a paper by Victor Barrios, convener of the Global Filipino Nation, a coalition of overseas Filipino professionals working in 30 countries across the globe.
Barrios was prompted to write the paper after he had joined a series of dialogues on monetary and fiscal policies between policy makers in government, including members of the Monetary Board, and leaders of dollar-earning segments of the Philippine economy.
The dialogs were organized by the Mama Sita Foundation.
Barrios said the strong peso, which recently rose to few centavos over P41 to the US dollar, was behind what he called a distorted growth crisis inflicted on the country. The crisis' main feature is growth that is consumption driven, not growth as a result of investments and robust exports.
He claimed that the biggest single loser in the crisis is the Bangko Sentral ng Pilipinas as it lost around P109 billion in 2010 in an effort keep the dollar from diving in value against the peso.
He warned that if the BSP continues buying excess dollars entering the country and keeping them in its vaults as Special Deposit Accounts, the central bank could go bankrupt by 2014.
The BSP intervenes in the exchange rate if it threatens to move the inflation rate outside its target range and in order to prevent major exchange-rate volatility.
Barrios said that the families of overseas Filipino workers are also victims of the strong peso, losing P25 for every P100 equivalent of their dollar earnings in the past five years.
According to Barrios, a third victim is the business process outsourcing industry which is losing out to competitors because of the strong peso. The BPO industry is known to be the country's only sunrise industry in the past decade. It is also the country's second biggest dollar earner next to OFW remittances.
He said all other productive segments of the economy including domestic industries that compete with imports made cheaper by the strong peso, have also been penalized by the strong peso policy.
He listed the national government that borrows cheap dollars, smugglers and their local distributors, the oil companies, public utilities and importers of foreign goods as the only beneficiaries of a strong peso.
Barrios suggested at least seven policy decisions that need to be adopted to correct the situation. The most radical of these policies is the gradual depreciation of the peso to a target level where local goods can compete comfortably with imports.
He further suggested that the national government must locally borrow all the money that covers its yearly deficit and to prepay its foreign loans, the BSP should hire investment bankers to manage part of its idle foreign reserve funds, a "Tobin" tax must be imposed on hot money except for direct foreign investments. — DVM, GMA News
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