Government Urged to Shift Foreign Exchange Management Next Year
Byline: Bernie Cahiles-Magkilat
Exporters have urged government to shift foreign exchange policies next year to propel exports growth, which is expected to cap the year with a lower 4.0 to 5.5 percent growth only from an original target of 10 to 11 percent.
Philippine Exporters Confederation president Sergio Ortiz-Luis said this can be done by pegging the foreign exchange rate at a certain level.
Ortiz-Luis cited studies by the University of the Philippines and the Philippine Institute for Development Studies that for every 10 percent movement of foreign exchange would mean a corresponding 1.2 percent increase in inflation.
"An additional 1.2 percent in inflation is still livable," Ortiz-Luis said.
But a 10 percent movement in the foreign exchange would only translate to a 3.9 percent inflation rate from the present range of 2.6 to 2.7 percent.
A higher inflation rate would put a pressure on the local currency and cause it to depreciate. The government is also closely guarding the inflation level so as to control increases in prices of commodities.
"But what is 5 percent or 6 percent inflation rate when even at 2.6 percent prices of commodities are still going up," Ortiz-Luis said.
"On the other hand, lower inflation is killing our manufacturing sector. It kills exports and overseas Filipino workers," he pointed out. OFWs have been long complaining that their dollar earnings have lower peso yields and yet prices of commodities are going up.
Ortiz-Luis has also criticized the Central Bank of the Philippines for abdicating its role in the foreign exchange setting to fund managers. …