RP Gov't takes measures to stem Peso rise

From Forbes.com: RP Gov't upgrades growth target, takes measures to stem Peso's rise:

"The government also upgraded its GDP growth target for next year to 6.3-7.0 percent from 6.1-6.8 percent with brisk domestic demand seen making up for weak exports stemming from a US slowdown.

Exports are expected to grow by 8 percent and imports by 9 percent under the revised target for

2008 which policy makers approved on Friday. The forecast is also anchored on an inflation target of 3-5 percent and benchmark Dubai oil prices averaging 80-90 dollars a barrel, Santos said.

The peso is projected to trade at 42-45 to the dollar next year, weaker compared to current levels.

The local currency hit a high of 41.40 to the dollar in morning trade Monday, losing some ground after hitting a seven-and-a-half-year high of 41.13 on Friday.

The best performer among Asian currencies, the peso has gained more than 18 percent so far this year and looks set to conquer more ground in the coming days as overseas-based Filipinos send more money for the Christmas holidays to their families in the Philippines.

Halting peso's rise

Santos said the government is planning to pay more loans ahead of their maturity to halt the

peso's rise.

'We intend to prepay more foreign loans of the central bank and the government to create downward pressure on the peso,' he said. He did not provide details.

Last week, Finance Secretary Margarito Teves announced that the government would cut the share of foreign borrowings in its financing program next year while increasing the share of domestic borrowings as part of measures to temper the continued strength of the peso.

The government will reduce the ratio of its foreign borrowings to 30 percent next year from 36 percent this year, while increasing the share of domestic borrowings to 70 percent from 64 percent, Teves said.

The government is also reviewing loan agreements with foreign creditors to limit dollar inflows, Santos said

'To stem the strength of the peso, we are looking very closely at those ODA (official development assistance) loans, many of which are dollar-denominated. We are evaluating very carefully (the need) to limit ODA loans to those that are necessary for the Philippines,' he said.

'Dollar loans to pay for foreign goods and services, maybe yes, but dollar loans coming into the system in the form of cash, that is something the government should watch out for,' he said.

Santos said the government is 'comfortable' with an exchange rate of 42-45 pesos per dollar.

But the worry is that the peso could strengthen further given the strong inflows, bulk of which are in the form of remittances from Filipinos working abroad."

State of RP Economy a Picture of Mixed Images

In the Manila Times, Godofredo Roperos has mixed feelings of satisfaction and apprehension for 2007. Satisfied with surprising economic growth but apprehensive over sharp rise of peso against dollar.

"...

Indeed, the unusual rise in the value of the peso against the US dollar has generated undue implication not only for the OFW remittances but also for the exporters, further producing mixed images of the nation’s economy in 2007. The increase in the dollar value should improve the overall economic prospects of the country over the coming months. But instead it produced problems for OFW beneficiaries in the rural areas.

Many OFW families have contracted indebtedness through the purchase of residential lots, the construction of houses and the buying on installment of household appliances. When the peso started appreciating, the OFWs fixed remittances to their families with budgetary estimates anchored on the earlier peso-dollar exchange rate, begun to play havoc on their budget. While the remittance remained the same, peso amount diminished.

The same problem emerged in the export sector. “Exports grew by only 4.9 percent to $37.2 billion in the first three quarters from a year ago, prompting economic officials to admit that the official export growth target of 11 percent for the year was no longer attainable.” The official foreign exchange projection for the year was conservatively estimated to settle at an average of P47-P49 to a dollar, but this did not materialize."

Dollar gains on Peso

News from Reuters.com: Dollar gains on Peso and other Asian Currencies.

"Asian currencies fell against a broadly stronger dollar on Monday after U.S. consumer price data dampened prospects of further interest rate cuts from the Federal Reserve.

The Philippine peso briefly touched 41.50 per dollar, down about 0.7 percent from Friday's close as investors took profits after the currency's rapid gains in recent weeks.

"The peso is mostly offshore-driven and the market is taking profits from the peso's rapid rises as well," said a Manila-based trader. "But the bias is still to short the dollar."

The peso has gained more than 18 percent versus the dollar this year, making it Asia's top performer, with most of the gains coming in recent months as the dollar succumbed to U.S. housing and credit market woes."

 

RP Gov't to Adopt Peso Dollar Rate Range for 2008

News from the Inquirer: Gov't to adopt fixed range for Peso Dollar Exchange Rate.

"THE GOVERNMENT HAS ADOPTED an exchange rate of P42-45 to a US dollar as basis for the setting of economic targets and policies next year, taking into account the unexpected sharp rise of the peso this year.

The rate assumption was approved last Friday by the interagency Development Budget Coordination Committee (DBCC).

The foreign exchange and other macroeconomic assumptions are used as basis in drafting the government’s fiscal program for a year, including revenue collections and expenditures.

The DBCC’s technical board was said to have assumed an economic growth target of between 6.3 percent and 7 percent, in terms of gross domestic product, for next year.

In terms of the peso-dollar rate, the mid-point of a projected range is normally used. For next year, therefore, an exchange rate assumption of P43 to $1 will be taken into account in drafting the fiscal program.

The DBCC’s exchange rate forecast for next year took note of the projection made by the National Economic and Development Authority that the peso would remain strong next year at 43 to a dollar."

DBP to Fix Peso Dollar Rate for OFW's

DBP plans to fix peso dollar rate for benefit of OFWs, according to Balita.org.

"The Trade Union Congress of the Philippines (TUCP) has welcomed the plan of the state-run Development Bank of the Philippines (DBP) to offer overseas Filipino workers (OFWs) a fixed peso-dollar exchange rate.

This will soften the negative impact of the local currency's rise on the buying power.

Under the plan, OFWs may voluntarily subscribe to a program, under which they would agree to send home through DBP's remittance network a fixed amount of dollars every month for at least one year.

In return, the DBP would pledge to convert the dollars into pesos based on a pre-agreed exchange rate.

"We laud this initiative. This will not only protect OFWs and their families from further currency risks going forward, but also heighten competition in the remittance trade, which is crucially important in driving down excessive money transfer charges," TUCP spokesperson Alex Aguilar said."

Inquiry on inflated Peso Dollar Rate on OWWA and POEA fees

Gulfnews.com reports an inquiry into alleged overcharging by POEA and OWWA on OFW fees using inflated Peso Dollar Rates.

"President Gloria Arroyo has ordered an investigation into reports that a state welfare agency has been "overcharging" overseas Filipino workers (OFWs) on their membership fees.

In an interview aired by the government-run station Radyo ng Bayan, Presidential Management Staff chief Cerge Remonde said Arroyo has ordered a probe into the collection of fees from OFWs by the Philippine Overseas Employment Administration (POEA) and the Overseas Workers Welfare Administration (OWWA).

The fees being exacted on OFWs as part of "processing fees" are dependent on the peso equivalent of the dollar and some OFW groups have said these agencies have been overcharging OFWs from early this year when the peso started to gain strength against the US dollar.

They said the failure of the two agencies to take action in this regard is tantamount to "exploitation" of the OFWs. Remonde, on the part of the palace, said: "We will look into any report of exploitation of OFWs especially by the very agencies that are supposed to protect them."

Reports said both the POEA and OWWA are amenable to bringing down the fees but the question now lies on where the two agencies will start implementing a lower fee schedule for workers departing for foreign jobs.

Senate President Manuel Villar said steps should be taken to stop the "exploitative" situation.

Villar learned that POEA Administrator Rosalinda Baldoz and OWWA Administrator Marianito Roque, in an emergency meeting, agreed to revise the conversion rate applied in the collection of the $25 (Dh91.75) OWWA membership fee from 51 pesos a dollar to 42 pesos from January 1, 2008."

OFWs call for balance on Peso Dollar Rate

ABS-CBN News reports calls by an OFW group seeking balance on strong peso.

"Members of overseas Filipino worker (OFW) group Migrante in Saudi Arabia called on the Philippine government, specifically the Finance department, to help balance the strong peso and scrap the Oil Deregulation Law to help Filipino workers get more out of their income.

This came after Finance Secretary Margarito Teves announced on Wednesday measures to slow down the strength of the peso.

"Even as we welcome recent moves by the Department of Finance (DOF) to balance the strong peso by adjusting the denomination of foreign loans, we believe it still wouldn't be enough as long as prices of basic commodities continue to rise fueled by the oil deregulation law," said A. M. Ociones, Migrante coordinator in Saudi Arabia.

In the statement, Migrante welcomed the moves by the government to abate the strength of the peso, which include increasing the share of peso-denominated foreign borrowings in 2008 and the issuance of an additional P20 million government securities."