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STATE-OWNED Development Bank of the Philippines (DBP)
still has doubts on the planned mechanism aiming to lock
the exchange rate the bank offers as a service to the
overseas-working Filipino community and blunt the impact
of the strong peso.
The
proposal originated from Overseas Workers’ Welfare
Administration (OWWA) chief Marianito Roque and resulted
from his dialogue with Sen. Mar Roxas II and with
Malacañang.
According to DBP president Rey G. David, the bank is
studying a number of mechanisms under which the impact
of the strong peso on the spending power of OFW families
may be enhanced given the steady deterioration of the US
dollar.
“We are
looking at models that would achieve the same effect,”
David said in a telephone interview.
David
was apparently being cautious about the plan considering
the implications, such as which entity would shoulder
what would obviously be some subsidy requirement in
order to sustain that kind of arrangement. The OWWA-endorsed
plan had originated from a senatorial call for the
government to do something concrete to ease the plight
of OFW families and of the export sector.
The OWWA
proposal entails costs that no one at this point is
certain about, such as who should shoulder costs that
DBP, as a state-owned bank, is prohibited from
subsidizing.
Under
the Owwa model, DBP would enroll qualified OFWs in a
program where the peso value of their foreign currency
earnings would be fixed at given rate for up to a year.
In this
way, beneficiary OFW families would be assured of a
fixed peso equivalent to their dollar earnings.
Theoretically, the upside for DBP is that the remitters
are locked into the bank for a year, but no one in the
government has apparently done the math to see whether
the benefits of having a certain number of locked-in
workers for a year would compensate for the costs of
keeping the exchange rate fixed for them.
What
Roque forgot to account for, however, was the identity
of who eventually shoulders the differential as the
exchange rate improves over time.
That is
a cost that no one right now knows for certain anybody
was willing to underwrite, the Bangko Sentral ng
Pilipinas said in reaction.
“This
can be achieved by using a hedging facility,” BSP
Governor Amando M. Tetangco Jr. said in a text message.
Hedging
as an exporter tool is already available at the DBP,
albeit volumes that do not impress many banks.
It works
by fixing the future earnings of exporters to a
preagreed rate for a fee, shielding them from exchange
rate losses as the peso improves relative the US dollar.
Deputy
BSP governor Diwa C. Guinigundo said the OWWA and the
DBP have to flesh out their plans so that the issue of
subsidizing one sector over another becomes clear.
Subsidies, as a whole, are against existing policy.
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