Press Release
September 28, 2012


Senator Miriam Defensor Santiago, speaking at a business forum in Bacolod City today, September 28, cautioned the Philippine government against continually borrowing from foreign sources.

The senator said that the problems of a weak world economy and the continuing strengthening of the peso should deter the PH government from borrowing abroad. She said the government should instead borrow from the Bangko Sentral ng Pilipinas (BSP) to finance its deficit and service its debt.

"The Bangko Sentral ng Pilipinas (BSP) has offered to accommodate the government's foreign exchange needs. It has $80 billion gross international reserves. I advise the government to take on BSP's offer. It's a win-win situation for both," Santiago said.

Santiago added that borrowing funds from abroad increases the supply of dollars in the Philippine system and makes the peso stronger. She said this has a negative impact on overseas Filipino workers (OFWs) and their families.

From January to September 2012, OFW remittances grew 5.4%, but the peso appreciated by 5.8%. Hence, while the dollar remittances have gone up, their value in pesos has gone down.

"For OFW workers, if the peso is strong, the value of their remittances goes down so they have to send more dollars to their families who live on a peso budget. Either they draw on their savings from abroad or they borrow. Either way, their response is not sustainable and poses more hardship for them and their families," Santiago explained.

"Borrowing from local sources will also help Filipino savers. On the other hand, borrowing from abroad will only help foreigners," Santiago added.

Santiago also urged the BSP to continue to limit the seemingly uncontrollable entry of "hot money" into the country. Because of the gloomy world economic outlook and the rock-bottom or near-zero interest rates in the developed world, investible short-term funds are in search of the best places where they can park their funds.

"The Philippines happens to be an attractive place for such short-term funds. With its relatively high interest rates and the strong likelihood that the peso will continue to appreciate in value, it makes sense to park one's investible funds in the Philippines," she explained. "But while this is good for short-term foreign investors, it wreaks havoc on the domestic economy. Imagine how the strong peso has adversely affected the lives of many overseas Filipino workers and workers in exports businesses."

The senator said that PH economy grew by a "respectable" 6.1% during the first half of the year.

"However, while the government continues to trumpet the economy's growth, the more important question is whether this growth is inclusive and sustained. This means that economic growth must benefit the great majority of our people," Santiago said.

Santiago cited statistics showing that as of July 2012, 2.8 million Filipinos remain unemployed and 8.5 million are underemployed. One of three Filipinos doesn't have jobs, are working part-time, or are unhappy with their present jobs.

More than one of four households continues to live below the poverty threshold. An 24-27 August 2012 Social Weather Stations survey showed that overall hunger rose by three points to 21 percent or 4.3 million families.

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