Erle Frayne D. Argonza
A truly good news, making PH as an endeared country for investments by both domestic and foreign stakeholders. $67.8 Billions—end of Apri 2011 Forex—is equivalent to nearly 14 months of imports, a fact that should make Filipinos happy a bit, more so that the forex reserves is coupled with a strong peso that is among the darling currencies of Asia.
The forex reserves is still rising by the way, and is following the general trend in East Asia. There is no better choice for PH to go then to continue to shore up its forex reserves, as the level of international trade, which surpassed the $100 Billion mark couples of years back, will breach the $200 Billion level of two-way trade (imports & exports) by 2015.
PH good performance in forex is for me a cause for celebration, amid the cacophonies of bad political news circulating on a daily basis. Economics had already sealed itself off from bad politics through a firewall, and so no matter what political fires there are, the economy will continue to grow and prosper. The ancient malaise of poverty hopefully would benefit from the sustained growth going on.
PH came from a very long history of lackluster performance as far as the forex level is concerned. Always short of the foreign monies, the International Monetary Fund found every reason to discourage foreign financiers, bankers, and investors from getting into the country. Low forex reserves also became part of the rationale for imposing austerity measures on PH, the effects of which are still felt today even if the country already graduated from the IMF program.
Low forex reserves also went hand in hand with Balance of Payments or BOP deficits. And may we add to the downgrading list the lingering low current accounts deficits. Add to the list the high level of public debts, which at one time threatened to bring back the economy to the stone age.
Those list of ailments have been addressed, thanks to the critique raised by patriotic economists on the present monetary and fiscal policies. The Bangko Sentral (central bank) also continued to strengthen its institutional capacities and regulatory grid, thus ensuring better inflows and reserves of foreign exchange.
By and large, exports comprise the biggest chunk of forex, at past $50 Billions per annum. Overseas remittances (workers & business profits), tourism, foreign investments (FDIs & portfolios), new money from external loans comprise, and ODA comprise the other gross sources. Minus the payments for imports, loans/credit, FDI repatriation of remittances to mother countries, and that gives you the net balance at any given time.
Converting the impressive forex reserves to loan-ready credit is a problem of the Bangko Sentral. The availability of low-interest credit for the poor folks, through micro-finance and cottage industries, is a challenge. Fat purses shouldn’t be made idle for long, as that would mean the high forex reserves is contributing to mass poverty which is a gloomy paradox if that will indeed happen.
[Philippines, 16 May 2011]
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