MANILA — The Philippines must “do something” about sharp fluctuations in the foreign exchange rate to make the currency’s movement predictable, its socioeconomic planning secretary said on Wednesday.
The Philippine peso is Southeast Asia’s worst-performing currency, having lost 13.4% against the US dollar so far this year as the Fed’s aggressive policy tightening to combat inflation boosts the greenback’s safe-haven appeal.
“We have to watch out for any sharp changes in the exchange rate and be able to do something about it,” Socioeconomic Planning Secretary Arsenio M. Balisacan told reporters on the sidelines of a business forum.
“What’s important are the swings. We don’t want that,” Mr. Balisacan said, adding the government will not dictate policy to the Bangko Sentral ng Pilipinas (BSP).
The central bank has said it was active in the foreign exchange (forex) market and selling strategically to prevent “excessive” forex movements.
At a Senate hearing on Wednesday, BSP Senior Assistant Governor Iluminada T. Sicat said the BSP “will always be ready to participate” in the forex market but only to “smooth out” excessive volatility “rather than defend a specific level or trend of the peso.”
“The BSP is also prepared to utilize other tools to respond to fluctuations in exchange rate,” Ms. Sicat said, citing as examples, the US dollar repo facility and currency swap arrangements.
President Ferdinand R. Marcos, Jr. said on Tuesday his government was prepared to defend the peso, and would continue to use interest rates to combat inflation that is already at four-year highs.
The central bank, which has two more policy meetings left this year, has so far raised key policy rates by 225 basis points (bps) this year, including an off-cycle 75-bp hike in July, to tame inflation and slow the peso’s decline.
WEAK PESOMeanwhile, Mr. Balisacan told reporters that he does not think a weak peso will hurt the economy.
“You can benefit even more if you can quickly fix our supply bottlenecks or our constraints to production. Poor infrastructure and logistics, high cost of power and water — if you can fix those, you’ll be able to develop more products for export, that way you can benefit from the weakening peso,” he said.
“In the meantime, there are other sources of dollars. Our remittances continue to be robust, we expect our exports to be contingent on how many of our trading partners are affected by the slowdown and fear of recession,” he added.
On Wednesday, the peso closed at P58.945 a dollar, down by 19.5 centavos from the previous day and by 15.58% or P7.945 from its P51 close on Dec. 31, 2021.
Mr. Balisacan also said he is not in favor of granting universal subsidies and removing value-added tax on certain goods to address inflation.
“Our approach is that those hurt or vulnerable like the poor are going to be protected by these challenges, particularly inflation. The government must expand its cash subsidy programs to address the concerns of farmers and fisherfolk, provide assistance as they face rising input prices,” he said. — Reuters and Luisa Maria Jacinta C. Jocson