Nosedive

If you haven't noticed, the peso has taken a nosedive – with serious repercussions on our inflation rate.

- ALEX MAGNO

July ended badly for our currency. In one trading day, the peso shed 74 centavos, falling to $1:P58.32. This is just two centavos higher than the low point of $1:P58.34 we hit on Feb. 4, 2025 amidst concerns over the inflation rate. We might still hit the lowest point on Friday trading.

The most proximate factor explaining the drop in the peso's exchange value is the decision of the US Fed to hold interest rates steady. This is despite strong political pressure from Donald Trump to drop interest rates in order to induce growth.

The comparatively higher interest rate regime prevailing in the US, adding to the prospects of interest rate cuts by our Monetary Board, makes a dollar a more attractive sanctuary for institutional investors. The contrast is sharpened by the Aug. 1 deadline set by Trump to enforce insane tariff rates on all the world's other economies.

This week, too, Philippine public debt rose above P17 trillion, given our government's propensity to borrow. At the rate we are going, borrowing like money was going out of style, the Marcos II administration will easily exceed P20 trillion in outstanding debt before the end of this presidential term.

Rather than address the need for fiscal consolidation, the Palace spokesperson recently announced that our monetary authorities are considering a debt-to-GDP level of 70 percent sustainable. That seems a stray announcement meant to justify the administration's propensity to borrow to fund a river of subsidies, including the costly and unsustainable P20-per-kilo rice.