BSP refuses to print money to weaken peso

The Bangko Sentral ng Pilipinas has ignored proposals for it to print more money so that the peso will become weaker than it is now against the US dollar.

Although the BSP admitted that it has been buying dollars from the market to help temper the appreciation of the local currency, it stressed that it would not increase its dollar-buying activities just so the peso would become artificially weak.

According to BSP Governor Amando Tetangco Jr., the act of printing more money to significantly weaken the peso will have serious and adverse effects on the economy.

“A few have encouraged the BSP to ‘print more money’ instead of sterilizing as a response to capital inflows. They would like the BSP to be more ‘resolute’ in influencing the exchange rate,” Tetangco said in a speech during an economic forum Friday.

“My response to this is that doing so would be inflationary. [It] would lead to a tremendous expansion in domestic liquidity that would fan price pressures,” Tetangco explained.

The proposal for the BSP to print more money and be more aggressive in dollar buying came amid concerns that the appreciation of the peso is making the country’s export and business process outsourcing (BPO) sectors less competitive.

A stronger peso makes export goods from the Philippines more expensive. It also makes the cost of labor in the country higher. Members of the BPO sector said that, with the rise of the peso and the depreciation of the Indian rupee, the Philippines’ ability to compete with India in terms of attracting BPO investments has been dampened.

But Tetangco said the BSP would keep its policy of allowing the market to determine the exchange rate to prevent volatility in foreign exchange.

The peso on Friday hit an intraday high of 41.36:$1, the strongest in four and a half years.