As the peso crashed past P62 to a record low, the Governor of the Bangko Sentral ng Pilipinas offered his diagnosis: “mayabang tayo.” Filipinos, he said, spend too much and save too little, and that consumption culture is dragging the currency down.
With due respect, this is not true.
Most of our imports are inelastic essentials, not consumer luxuries. The current account deficit comes from refined petroleum, coal, fertilizer, industrial machinery, and capital goods. The country produces none of these in sufficient quantity and imports nearly all of its oil. Ordinary households, meanwhile, spend mostly on food, utilities, and transport, about half of the family budget, with food alone taking a third, out of an average wage of about P21,500 a month. There is no yabang in spending for a jeepney fare or a kilo of rice. And if the Governor is looking for the biggest spender who saves nothing, it is not the worker whose premiums and taxes are deducted from every payslip, but the National Government, whose budget deficit grew more than five times larger in July.
As the peso depreciates, the landed cost of imported fuel, grains, and raw inputs increases immediately. As baseline prices rise, households must allocate a larger share of their income simply to purchase the same volume of basic necessities. We therefore reject the BSP Governor’s premise that working households’ “spend-more” mindset is sinking the peso.
The BSP Governor also told the public not to expect the BSP to burn dollars defending P60, because “hindi kaya ’yun.”
Openly signaling the limit of central bank intervention invites currency speculation. Central bank communication is itself a form of intervention. The country’s dollar reserves defend the peso even when they are not spent. Traders who do not know when the BSP will act must think twice before betting against the currency.
Publicly declaring a limit on market intervention, or admitting that an FX level is undefendable (“hindi kaya 'yun”), encourages short-selling and accelerates downward momentum on the domestic currency. We urge the BSP to uphold strategic ambiguity in its public communications.
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