Exporters struggling for more solid footing after a wobbly year got a second punch this week when the Bangko Sentral ng Pilipinas (BSP) slammed their plea for more levers to be pulled by monetary authorities to rein in the strengthening peso.
Rejection of their appeal for a more stable and competitive exchange rate was issued by BSP deputy Governor Diwa Guinigundo in reply to PHILEXPORT Cebu president Venus C. Genson's written appeal which was earlier published by the PHILEXPORT News and Features.
"With regard to your proposal on the rationalization of the BSP's intervention policy to tighten exchange rate volatility, this suggests increased BSP intervention in the foreign exchange market. The BSP adheres to a market-determined exchange rate policy. This means that the BSP does not target or support a given level of band of exchange rate but allows the interplay of supply and demand for the currency to determine the exchange rate," Guinigundo told the Cebu export leader.
"Under inflation targeting, which has been the BSP's framework of monetary policy since 2002, there is also greater allowance for movements in exchange rates in any direction," the BSP second-in-command added.
Translated to simple English, Guinigundo was saying the BSP does not intervene in the market even when the country is awash with billions in excess dollars sent in by OFWs. It also allows wider swings in the exchange rate as a tool in reining in inflation.
Guinigundo further said that the BSP cannot increase its purchases of foreign exchange indefinitely without monetary consequences that could eventually impinge on price stability.
The top ranking BSP official further claimed that the long-term performance of the export sector is not determined by price competitiveness alone. Other reforms aimed at increasing productivity are as important in raising and sustaining overall external competitiveness, he lectured the export leader.
Instead of griping over the erosion of exporters' margins by a rampaging peso, the BSP official invited exporters from Cebu to join the regional conferences the BSP is organizing to teach them how to manage better their exchange rate risks.
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