ROXAS: BORROWING IN PESOS TO TAME PESO HIKE, OFW AND
EXPORT WOES
ECONOMY "IN DANGER OF STALLING" FROM NEGATIVE EFFECTS OF HIGH P vs $

Senator Mar Roxas called on the government to act immediately to mitigate the high peso-dollar exchange rate which is now constricting the purchasing power of families of overseas Filipino workers and which could dislodge workers in the export and manufacturing sector.

"Our economy is in danger of stalling if we continue to turn a blind eye to the plight of OFWs and exporters," he said, emphasizing that the economy is driven primarily by consumption, which is more than 70% of gross domestic product.

The Chairman of the Senate Committee on Trade made this proposal: that the government should cease borrowing in dollars to amortize the country's foreign debt.

Instead, he said the government should borrow in pesos, which could be used to buy the dollars needed for debt amortization. He explained this could prop up demand for dollars and, in effect, strengthen the dollar versus the peso.

"Isang kongkretong hakbang na magagawa ng gobyerno--ng Bangko Sentral o ng Treasury--ay sabihin na lahat ng ating dollar-denominated loans ay hindi nila ire-renew sa pamamagitan ng dolyar. Uutang sila sa piso, at iyon ang iko-convert sa dolyar, at sa ganoon, mas magiging malaki ang demand para sa dolyar, magkakaroon ng mas magandang balanse ang peso-dollar dito sa atin," he said.

"Right now, even if we are already flooded here by dollars, we continue to borrow in dollars. In effect, we are just shooting ourselves in the foot," he stressed.

Under the 2008 National Budget, the government is set to borrow P125 billion--or $2.67 billion--from foreign sources. Of this, P87.7 billion--or $1.87 billion--will be spent solely to roll-over outstanding foreign debt. The government had projected that the dollar will be worth from P46 to P48 in 2008.

"Let's put our money where our mouths are. Our OFWs, exporters, BPO and tourism industries are hurting by P10 less per dollar or 20%. That's a lot," he said, noting that the peso has strengthened from P51.30 last year to P41.74 this year.

"Sabihin na nating may 8 milyong OFW ngayon at ang kabuuang remittance nila ay $12 bilyon, eh di kada pamilya nila dito ay tumatanggap at gumagastos ng $1,500 kada taon," he said.

"Kung dati-rati'y P76,500 ang kapalit nito sa piso, P61,500 na lang ito ngayon, bawas na ng P15,000. Pang-matrikula na iyon ng isang anak o pambayad ng kuryente sa isang buong taon," he stressed.

As far as exporters are concerned, Roxas estimated that assuming export revenues last year of $47.4 billion are the same this year, exporters would now earn at least P474 million less (P2.4 billion with last year's exchange rate versus P1.9 billion with the present exchange rate).

Roxas sees the impact of this proposal on inflation would be minuscule compared to the emasculated spending power of Filipinos--and possible loss of jobs--due to the strong peso.

He noted that inflation for the year has so far been averaging at 2.6%, which is at the lower band of the central bank's target of 2.6% to 3.1%. The target for next year, as assumed in the proposed 2008 national budget, is 3% to 4%.

Roxas pointed out that interest rates of short and long-term government securities have now declined, thus, it is cheaper now for the government to borrow in pesos. He noted that the benchmark 91-day Treasury Bill rate has decreased to 3.67% this November from 7.36% in 2004. Meanwhile, the 3-month LIBOR rate has increased to 5.15% in October this year from 1.62% in 2004.

Government's outstanding foreign debt so far is P1.7 trillion--or $41 billion using the exchange rate last Friday--as of August, according to the latest data available on the Bureau of Treasury website.