DOF chief prefers weak peso

Finance Secretary Carlos Dominguez prefers a “slightly weak” peso to benefit the over 10 million Filipinos working overseas and at the same time boost the competitiveness of the country’s export sector.

Dominguez, a member of the seven- man Monetary Board of the Bangko Sentral ng Pilipinas (BSP), told members of the Kapihan sa Klub Inc. during a forum at the Club Filipino the government prefers an exchange rate of between 46 and 47 to $1.

“In other words, maybe 46-47. That is what we would prefer because our OFWs benefit and also the exporters benefit. That is why we have to balance all the time,” he said.

The head of the Department of Finance ( DOF) said OFWs as well as exporters suffered in the previous administration due to the strong peso.

“In the past administration they have always wanted a strong peso so you use less pesos to buy dollars. However when you have too strong peso two things will happen. Number one, your exports cost more so exporters here earn less and secondly your OFWs who are earning dollars will get less pesos,” he said.

Dominguez said the Duterte administration is trying to balance the interest of OFWs as well as importers who prefer a stronger peso.

“So in the government, we are always trying to balance the peso benefitting OFWs who are about 10 to 12 million against the people who import. For me, I would prefer a peso that is slightly weak,” he said.

The peso shed 5.23 percent and closed at 47.06 against the dollar in end-2015 from 44.72 to $1 in end-2014 due to external shocks brought about by the normalization of interest rates by the US Federal Reserve as well as the economic slowdown in China.

The local currency has so far gained 1.3 percent to close at 46.525 to $1 last Wednesday from 47.12 to $1 at the start of the year.

Dominguez said investors prefer to accumulate more dollars amid the possibility of another round of interest hike by the US Fed.

The Philippines is the third highest remittance-recipient country in the world next to India and China. More than 10 million overseas Filipinos send around $26 billion to their families in the Philippines and account for about 10 percent of the country’s gross domestic product (GDP).

On the other hand, the country’s merchandise exports slipped 5.6 percent to $ 58.65 billion last year from $ 62.1 billion in 2014 due to weak global demand.