Retired Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo thinks President Bongbong Marcos and his economic managers led by Finance Secretary Ben Diokno would suck at poker based on their handling of the peso’s historic slump against the United States dollar.
“Are we prepared to waste our precious FX (foreign exchange) reserves? Announcing the need to defend the peso, the amount of US dollar to spend and defend it at ₱60 level would make us appear hopelessly clueless,” said Guinigundo in his Manila Bulletin column.
Guinigundo, who retired in 2019 after 41 years in BSP including 14 years as head of its Monetary and Economics Sector, cited three “uninspiring” sound bites made by Marcos after meeting with Diokno and other economic managers on October 15:
* The President said “the policy directions for the rest of the year and the first quarter of next year were discussed” which Guinigundo said gives the public the impression that his administration is “following a playbook by the quarter”;
* Marcos’ revealed that his team “will continue to use interest rates to mitigate the effects” which Guinigundo feels should have been left to the BSP to protect him from any backlash n case monetary policy yielded ugy results; and
* Marcos declaring ” may have to defend the peso in the coming months…” could be costly according to Guinigundo because it gives speculators ” an opportunity to make tons of money” and betrays the BSP’s lack of independence.
Diokno, who was BSP Governor under the previous administration, doubled down on Marcos’ soundbites when he pledged, during an APEC meeting in Thailand, to prevent the peso from breaching 60:$1 with $10 billion worth of gross international reserves (GIR) and 100-basis point worth of rate hikes by the end-2022.
Guinigundo said: “One wins in poker when he remains stoic, repressing the urge to flaunt his unbeatable cards, or telegraphing how much he is prepared to bet beyond those chips. But laying all these on the table means half of the battle is lost.”
Contrary to the stand of Marcos’ son, Ilocos Norte congressman Sandro, Guinigundo argued that the peso has nosedived to all-time lows this year because the local currency is really not strong for a “fundamental reason” – the balance of payments deficit has exploded to $7.8 billion in the first nine months of 2022 versus $665 million a year ago (the Philippines has been on a surplus for years with a peak of $16 million in 202).
“The US Fed’s spiraling interest rates aggravated this situation and motivated capital flight away from emerging markets including the Philippines. Our high domestic inflation, fiscal deficit, and public debt, could only work against the peso. The demand for the US dollar intensified even more,” said Guinigundo.
“Unfortunately, the sound bites that resonated from the Palace were not exactly inspiring. We have to underscore this because it is the nation’s utmost interest that is at stake in that meeting, and that is our best wish,” said Guinigundo.
