international economics - historial exchange rate philippines

8/2/2019 International Economics - Historial Exchange Rate Philippines

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Historial Exchange Rate Regime of Asian Countries

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Philippines

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ational Economics - Historial Exchange Rate Regime of Asian Countries


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Philippine Peso is the currency of the Philippines. The Central Bank of the Philippines, theBangko Sentral ny Pilipinas (BSP) administers foreign exchange controls and all othercurrency problems in the Philippines.

The former Marcos government of Philippines, known for its corruption, always aimed atretaining the foreign exchange earnings from traditional exporters. From 1970 to 1984, thePhilippines had an intermittent history of multiple rate structure with different rates to

foreign exchange transactions for exports, imports and foreign debts, on the basis of a daily"Guided Rate". From 1970 till 1973, traditional exporters were required to surrender 80%of the foreign exchange earning at a "Official Rate" fixed at 3.9, which is moredisadvantageous to exporters than other rates. This requirement was later replaced by astabilization tax on traditional exports, which also worked to siphon off the gains oftraditional exports. (Bautista, 1987)

In mid 1980s, with the economic takeoff of the neighbouring Asia-Pacific area, thePhilippines witnessed the importance of removing distortions in its economic regimes andopening up the highly protected economy. Also partly due to the 1983 financial crisis, in1984 the multiple rate structure was abolished. Ever since then, the Philippines has

maintained a floating exchange rate regime. An Inter-bank Rate, determined on the basis ofsupply and demand in the exchange market, has governed all transactions. The authoritiesintervene in the medium to maintain orderly market conditions and the political objectives.In addition, the Bankers Association maintains a Reference Rate as the Peso-U.S. Dollarconvention rate for customs valuation purposes and for computation of importduties/taxies.

Major sources of reference include:

1. World Currency Yearbook. (WCY)2. Annual Report on Exchange Arrangement and Exchange Restriction. (IMF)

3. Romeo M. Bautista (1987): Production Incentives in Philippine Agriculture: Effects ofTrade and Exchange Policies.

Date Changes to the exchange rate regimePeso per

U.S.Dollar

8November

1965

The fluctuating free rate was abolished. (WCY, 1984, p.614) 3.900

21

February1970

A multiple rate structure with a Mixed Rate (not explained in WCY)

was reinstated based on a controlled, floating Official FreeFlucturating "Guided" Rate. (WCY, 1984, p.614) . The daily "GuidedRate" was establishedby the Bankers' Association. (IMF 1976,p.369). 80% of foreign exchange earnings from some traditionalexports (including copra, sugar, logs, and copper concentrates)

were to be surrendered to the Central Bank at the Official Rate ofP3.90 per U.S. Dollar, while the remaining 20% could be sold at thefree market rate. (Bautista, 1987, p.24)

5.500

May 1970 The requirement of surrender 80% of export earnings was replacedby a stabilization tax on traditional exports. (Bautista, 1987, p. 24)




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22September

1970

6.435

20December

1970

The gold content of the Peso was cut 7.89%, paralleling the U.S.Dollar devaluation.

26 April1972

6.780

13February

1973

The gold content of the Peso was cut 10%, in the aftermath of theU.S. Dollar devaluation. (WCY 1984, p.614)

31December

1974

7.070

1975 In spot transactions between commercial banks and customers, themaximum and minimum spot buying rates are 0.5% and 1% belowthe guiding rate, respectively. The minimum and maximum spot

selling rates are 0.75% and 1.25 % above the guiding rate,respectively. (IMF 1976, p.369)

31December

1975

7.510

31December

1976

7.440

1977 For spot transactions in excess of US$100,000 between banks andtheir customers, the margins are competitively determined. (IMF

1978, p.331)

31December

1977

7.380

31December

1978

7.380

31December

1979

7.420

31December

1980

7.600

31December

1981

8.200

31December

1982

9.170




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23 June1983

11.000

5 October1983

Inter-bank trading in foreign exchange was suspended. The"Guided" Rate was phased out in favor of a controlled, floatingEffective Rate. (WCY 1984, p.614)

14.000

31December

1983

14.000

1984 All spot buying and selling margins were to be determined on acompetitive basis. (IMF 1985, p.400)

6 June1984

The exchange rate system was revised into a de facto multiple ratestructure as follows: The Effective Rate applied only to essentialimports and interest on the foreign debt.

Based on a 10% tax on the purchase of foreign exchange, anexchange for other transactions.

An exchange rate for export proceeds. The Black Market Rate wasofficially recognized as the major source of foreign exchange. (Theexchange rate for purchase of exchange in other transactions:19.80; Export proceeds were exchanged at P16.20 per U.S. dollar;The Black Market Rate: P20.00-P24.00) (WCY 1985, p.669)

18.000

10 October1984

The multiple rate structure was abolished.

Inter-bank trading in foreign exchange was resumed. An InterbankRate, determined on the basis of supply and demand in theexchange market, was to govern all transactions. Authoritiesintervene when necessary to maintain orderly conditions. (WCY

1990-1993, p.510)13

December1984

The Peso-U.S. Dollar guiding rate was abolished. (IMF. 1986. p.422)

31December

1984

19.760

29 March1985

The Central Bank announced that, the reference rate of the BankersAssociation should be the Peso-U.S. Dollar conversion rate forcustoms valuation purposes and for computation of import

duties/taxies. (IMF. 1986. p.422)31

December1985

19.030

31December

1986

20.530

31December

20.800




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1987

31December

1988

21.340

31December

1989

22.440

13September

1990

Guidelines were issued that the buying rate for spot transactionsmust not be less than 1% below the reference rate of the Bankers'

Association, while the spot selling rate must not be more than 2%above the reference rate.

For transactions other than spot, the buying rate must not be lessthan 1% below the spot buying rate, while the selling rate must not

be more than 1% above the spot selling rate. (IMF. 1991, p.398)

31 October1990

28.000

31December

1990

28.000

28 January1991

The margins for spot buying and selling rates for commercialreference transactions around the official reference rate wereeliminated. (IMF. 1991, p.400)

31December

1991

26.650

30 July

1992

A system of eight-hour continuous interbank foreign exchange

trading under the Philippine Dealing System (PDS) was introduced.(IMF. 1993, p.405)

31December

1994

24.418

31December

1995

26.214

15 March1998

The authorities allowed the Peso to float more freely against thedollar by lifting the volatility bank system. The band include a 6%

limit around the exchange rate of the previous day, with tradingbeing suspended for the remainder of the day if the limit wasreached. (IMF 1999, p. 683)

Notes:

Throughout the course, the Philippine authority posted an Official Rate of P3.90 per U.S.Dollar. This rate was originally used for exporters to surrender their exchange earnings tothe Central Bank since 1965. However, this rate is now left inoperative since the exportersare not required to render their export earnings any more. (WCY 1986-1987, p.511)


international economics - historial exchange rate philippines

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