Regulator all set to liberalize forex rules

Bangko Sentral hopes to keep peso’s rise in check

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The Bangko Sentral ng Pilipinas is set to ease foreign exchange rules anew to allow individuals and businesses to easily access the huge amount of dollars kept in the country’s banking system.

This will be the sixth time over the last few years that the BSP will ease the buying and selling of foreign currencies. The move is also expected to temper the peso’s appreciation.

“We will be coming up with … a sixth wave of foreign exchange liberalization measures … to facilitate [investors’] access to the dollar liquidity that is currently sitting in domestic banks,” Tetangco told the Inquirer.

The new measures—such as imposing fewer regulatory requirements on banks and less documentary requirements for importers in need of foreign currencies—will also enable investors to easily take dollars out of the country.

The BSP earlier reported that, as of the end of 2012, the amount kept in foreign currency deposit units of local banks had reached $25.15 billion—nearly 4 percent higher than the $24.20 billion registered the previous year.

With easier foreign exchange rules, the peso’s appreciation may be tamed.

The Philippines has been experiencing significant inflows of foreign currencies, driven by remittances and investments in the business process outsourcing (BPO) sector.

The BSP tolerates fluctuations in the exchange rate, but it immediately steps in whenever the peso sharply rises or falls. Extreme volatility in the exchange rate is bad for businesses and the economy, it explained.

Throughout 2012, the peso strengthened by nearly 7 percent against the US dollar to close at 41.05 on the last trading day of the year.

The peso has since breached the 40:$1 level.

The strengthening of the peso has helped temper the costs of imported goods and tamed domestic inflation.

But exporters are not too happy with the peso’s strength because it makes Philippine goods more expensive for foreign buyers and less competitive in the global market.

The last time the BSP liberalized foreign-exchange rules was in March 2012. What it did then was to lift the documentary requirements for importers in need of foreign currencies worth $500,000 and below. Previously, only importers with transactions worth $50,000 or below were exempted from the documentary requirements.

Also, the BSP lifted the requirement for banks to submit hard copies of reports on daily foreign portfolio investments and remittances.

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Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • joboni96

    pakana ng mga collaborators sa bsp

    para mas madaling manakaw
    ng mga amo nilang dayuhan

    ang kayamanan nating pilipino

    1. mag sugal sa stock market

    2. baratin ang mga mina natin

    3. mag benta ng mga di kailangang bagay
    sa mataas na presyo

    4. mamili ng mga lupain at ariarian

    5. kontrolin ang mga korporasyon etc

  • carlcid

    In a recent article entitled “Hot Money Blues”, Nobel Prize-winning economist Paul Krugman warns that “unrestricted movement of capital is looking more and more like a failed experiment”. Krugman states that “the best predictor of crisis is large inflows of foreign money”, adding that “in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out”.

    The cases Krugman mentioned are: “Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus”. So it can be seen that Krugman has done his homework!

    According to Krugman, “conventional wisdom blames fiscal profligacy”, but among the several cases cited above, “that story fits only one country, Greece”. All the other financial crises were attributable to the huge inflows, and sudden outflow, of “hot money”.

    • boboposter

      Exactly. Deregulation is one of the main causes of the late 2000’s recession. Deregulation lets out the hungry wolves into the economy, munching out on greedier and riskier investments which will be too big to contain in the event of a failure.

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