EVEN as the country’s economic managers released a statement defending perceptions on the country’s economy and the soaring prices of commodities came another worrisome report: the country’s dollar reserves fell to its lowest in six years in June.
Bangko Sentral ng Pilipinas (BSP) governor Nestor Espenilla Jr. said the Philippines’ gross international reserves level was $77.68 billion in June, lower than the reserves level of $79.2 billion in May. This is near the $75.3 billion in 2011.
I say this is a rather complicated issue for a political mind like mine to tackle. Suffice it to say that a country having low dollar reserves is not a good sign, considering that we are part of a global economy. It’s like in the family. Having bigger savings in the bank is always better.
The country’s economic managers are actually in a denial stage. When President Duterte said the economy is in the doldrums after reports of a soaring inflation rate, they came up with a denial. But the sooner they accept reality the better they would be able to ease our current economic woes.
Continued denial won’t work because unlike the other aspects, a problematic economy is easily felt because it hits us in the gut. When prices of commodities soar, that can be felt when the food served on the table dwindles. When the value of the peso drops, prices of imported products rise and importers groan.
That’s why when economic managers change the measuring stick in, say, acceptable inflation rate or even the poverty indicators to make a government look good, that won’t work. Eventually, really bites. It’s better to face the problem head-on.
Our economic managers are denying that the soaring inflation rate is partly due to the imposition of the Tax Reform for Acceleration and Inclusion (Train) law, which is meant to generate higher revenues for the government’s ambitious Build, Build, Build program.
But can they honestly say that it is just mere coincidence that when the Train law was implemented the inflation rate soared? The “killer” in the Train law is the excise tax imposed on petroleum products. As I have noted before, higher taxes on petroleum products make us vulnerable to rises in the global prices of the said products.
On the other hand, the ambitious Build, Build, Build program also triggers our acquisition of gigantic loans from China. This may not be easily visible but our foreign borrowing has also soared, also partly putting pressure on our dollar reserves.
Foreign borrowing was also what the late dictator Ferdinand Marcos resorted to in order to make the dictatorship look good. That funded the infrastructure projects that revisionists of our history use as proof of the good things that the Marcos regime did.
What they are not saying is that the borrowing from the International Monetary Fund and the World Bank was among the reasons the succeeding governments, from that of Cory Aquino onwards got burdened with loan repayments making economic recovery and the government’s delivery of basic services difficult.
Expect the government following the current one to be in the same difficult situation.