BSP is the key, Sen. Miriam says

BY Mikaela Joyce Sarthou

Senator Miriam Defensor-Santiago emphasized the role of Bangko Sentral ng Pilipinas (BSP) as a key in aiding the Philippines’ slowing economic growth in her business speech held in Bacolod City last September 28.

In her speech, Santiago said that the national government should commit to borrowing on local banks such as Bangko Sentral, as borrowing from domestic sources will help Filipino savers while borrowing from abroad will only help the foreigners.

“On the part of the national government, it has to show some restraint in borrowing from abroad. Borrowed funds from abroad increase the supply of dollars in the Philippine system and hence make the peso stronger,” Santiago said, suggesting domestic borrowing for the government to finance its deficits and service its debts. 

“The BSP has offered to accommodate the national government's foreign exchange needs. It sits on an $80 billion gross international reserves which is equivalent to one year's import requirements. The national government is advised to take on BSP's offer,” added Santiago, who sees BSP offer as a “win-win situation for both.”

Santiago said that domestic borrowing is vital as the value of peso continues to appreciate particularly during these times of worldwide economic uncertainty.

The peso value of remittances this year has turned negative. As remittances grew by 5.4%, peso appreciated to 5.8%. “Hence, while the dollar remittance had inched up, their value in pesos has gone down,” Santiago added, noting that the turn of event had a negative impact on consumption and investments.

“With a weak world economy, growth of Philippine exports will continue to be lackluster. Overseas remittances will continue to struggle and direct foreign investments will continue to trickle in,” Santiago said.

Further, she said that BSP should control the entry of hot money into the country. As Philippines have relatively high interest rates a strong likelihood that the peso will continue to appreciate, investors are attracted to park short-term funds.

“But while it's 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,” Santiago added.

According to statistics, as stated by Santiago, although the economy grew by 6.1%, a lot of Filipinos remain unemployed (about 2.8 million) and underemployed (about 8.5 million). About 1 of 3 Filipinos do not have jobs or are working part-time or unhappy with their present jobs.

She further stated that, many Filipinos --more than 1 of 4 households -- continue to live below the poverty threshold. A recent (August 24-27) Social Weather Stations survey found overall hunger rose by three points to 21 percent or 4.3 million families.