Haresco said that one possible measure is for the government to start imposing capital control as he noted the Philippine peso is "artificially appreciating versus the US dollar." The administration should also stop denominating treasury bonds to US dollar.
Haresco said that the debt woes of the US and the credit ratings downgrade by Standard and Poor's is depreciating the US dollar at a dizzying pace and for a country like the Philippines whose economy
largely depends on dollar remittances from overseas workers and Business Process Outsourcing (BPO) operations, its impact can be staggering.
"There's no time to waste. Our economic managers should extricate our country from falling into this economic abyss that can be caused by the faltering US economy. The observation phase should have been completed by now and we should start seeing actual solutions to give us cover from this financial firestorm that is battering the US economy. Our economic managers can start by imposing capital control to ward-off speculators," Haresco said.
By imposing capital control, Haresco believes that money speculators would not be able to engage in currency shorting which could hurt the economy even more.
Currency shorting "is the practice of selling assets, usually securities, that have been borrowed from a third party (usually a broker) with the intention of buying identical assets back at a later
date to return to the lender. It is a form of reverse trading, as it is selling high, then buying low at a later date."
Without capital control, speculators like George Soros who became known as "the Man Who Broke the Bank of England" after he made a reported $1 billion during the 1992 Black Wednesday UK currency
crises, can operate freely in the Philippines. Soros also shorted the Indonesian rupiah, Malaysian ringgit and Thai baht in the late 90's to earn another USD 2 Billion.
"It's easy for speculators to put up honking firm to buy pesos now... wait for inflationary pressures... then dump the peso," Haresco said.
"There is already some USD 100 Billion inclusive of USD 62 Billion accounted by Bangko Sentral ng Pilipinas as our foreign currency reserves. In Korea, Indonesia and Thailand it is most difficult for a money speculator like Soros to short their currencies because of their taxes and prescribed periods for drawdowns. I really think we should do the same ASAP," he said.
Haresco's statement came shortly after the US was slapped with a credit rating downgrade by Standard and Poor's.
S & P, which is one of the world's most respectable credit rating body, downgraded America's AAA Credit rating to AA+ because of concerns about the government's budget deficits and rising debt burden. Economic Analysts claim that this downgrade will have serious ripple effects on the country's economy which relies heavily on dollar remittances.
Malacanang said it is still monitoring the situation and is still unsure if the accelerating depreciation of the US dollar can actually have a negative effect on the overall outlook of the country's economy.
Source: http://www.congress.gov.ph
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