A lawyer by profession, Atty. Rivera ventures into unfamiliar territory to tackle the foreign exchange issue after critics blame Duterte for the peso slump.
In a Facebook post, Atty. Bruce Rivera cited 6 critical factors that play an important role in influencing the foreign exchange of any country, in this case, the Philippines.
The first five factors, Atty. Rivera asserted has nothing to do with President Duterte’s doing.
However, the sixth factor, Atty. Rivera believed is the fault of an external influence.
In conclusion, Atty. Rivera told Duterte’s critics to blame others who really contributed to the peso slide aside from blaming Duterte.
Please read Atty. Bruce Rivera’s post below.
THE EXCHANGE RATE IS PHP50 TO US$1: IS IT DUTERTE’S FAULT?
Critics are quick to blame the decrease in the foreign exchange value of the Philippine Peso on PRRD and that had been one of their better argument because indeed, the exchange rate has steadily risen since the start of 2016. However, they should not be quick to point a finger on a man who not even finished a year of his term.
Foreign exchange is influenced by six important factors and in order to fully understand it, let us discuss each factor and see if Duterte has something to do with it.
First is government intervention in subsidizing the exchange. Clearly, the policies of the BSP has not changed over the years on the forex. Unlike richer countries who manipulate and stabilize its currency, the Philippines cannot afford that luxury.
Second, inflation rates pertain to the sustained increase in the price levels of goods and services over a period of time. The BSP considers 3% inflation as within the comfortable level and the present 2.7% inflation has no little or no effect on the forex.
Third, are the interest rates are the benchmark for overnight borrowing which is pegged at 3% as well. This also did not change starting from the GMA administration. As such, interest rates have little or no effect on the forex.
Fourth, the current account deficit talks about the spending of government. In the present situation, Duterte took office in the middle of the year with merely 10% of the national budget remaining. Worst, to boost its credit rating, the Aquino administration did not spend much for infrastructure so it will have funds for other purposes. As a result, the Duterte administration will have to spend more on infrastructure and other capital spending because it has to augment and make-up for the upkeep of our roads, bridges, airports, etc. in order to provide better service to the Filipinos. Clearly, the shortcoming started in the Aquino administration and the present government is bearing the brunt.
Fifth, the foreign debt of the Philippines. In this case, it reached its highest amount at almost US$78 billion dollars in 2012 during PNoy’s time. Clearly, what we are experiencing now are merely vestiges of the borrowing ability of the past administration despite being stingy in building infrastructure.
Lastly, international speculation. This is where perceptions matter. This is where they want to pin the President. Hence, the reason why pro-Yellows are made to write for international newspapers making Duterte look bad. Portraying him as Hitler and giving the perception of the Philippines as a place not suitable for business. A deliberate demonization of PRRD that causes several businesses to avoid investing in the Philippines.
So, people of the opposition, the next time you lament the peso-dollar ratio, be sure that after you blame President Duterte, try blaming others as well. Those who really are causing the problem.
What do you think of Atty. Bruce Rivera’s explanation? Please comment below.