EDITORIAL

Program to ease impact of strong peso on OFWs minimal

The launching next month by President Gloria Macapagal-Arroyo of a new deposit instrument designed to ease the impact of fluctuations in currency rates on the remittances of overseas Filipino workers is what we may call a few morsels for the birds. In other words, the interest rate is not that high, thus if the scheme would benefit OFWs, it would be minimal.

The Long-Term Negotiable Certificates of Deposit scheme was presented by the Land Bank of the Philippines as investment opportunities for OFWs during the President's meeting with the Filipino community at the Madinat Jumeirah Hotel in Dubai, said a Malacanang e-mail.

Land Bank president Gilda Pico said the flotation of the instrument in P20,000 denomination has a five-and-a-half- and 10-year maturity periods, and will yield an annual interest of 6.25 and 6.88 percent, respectively.

An OFW who invests P20,000 in the new deposit instrument will earn an interest of P8,056 in five-and-a-half years and P12,760 in 10 years, Pico said. She said the launch of the deposit instrument this March will be carried out through a public offering.

In her speech during her meeting with the Filipino community in Dubai, the President said the instrument would greatly help OFWs, who bear the brunt of the strong peso, and help them not only as OFWs but overseas Filipino investors as well.

The forthcoming launch of the new deposit instrument, she said, is only one of the steps being taken by the President to soften the blow on the OFWs’ income arising from the strong peso.

She has also launched the Tindahang Pinoy under the One Town , One Product program of the Department of Trade and Industry that would enable OFWs earn extra income as franchise holders in the sale of quality Filipino products in their host countries.

The Tindahang Pinoy is also part of the Overseas Workers Welfare Administration's entrepreneurship training for OFWs wanting to engage in business when they return to the Philippines.

Meanwhile, the Bangko Sentral ng Pilipinas, through the banks, will be offering to exporters and families of OFWs available hedging facilities to ease the effects of the peso’s rapid appreciation on their finances.

Hedging is a financial tool designed to minimize one’s exposure to unwanted business risks while still allowing profit from an investment activity. Some of the most common currency hedging tools offered by banks are forward contracts, options, and swaps.

The state-run Development Bank of the Philippines ’ hedging program for exporters, for instance, allows for the settlement of the difference between the agreed dollar or peso forward rate and the market rate at maturity.

Exporters and OFWs have been complaining of the rapid rise of the peso, which appreciated by about 18% last year, and are demanding special treatment such as subsidized currency exchange rates. Exporters are instead being encouraged to hedge but banks are still encountering some resistance as the practice of hedging is still unfamiliar.

Monetary authorities will hold fora to educate exporters and families of overseas Filipino on this option, one session each in Luzon, Visayas, and Mindanao within the first quarter. The forum will include presentations from banks and testimonies of exporters who have benefited from such programs while Central Bank will also present other options for dollar-earners to shield themselves from foreign exchange fluctuations. Anyhow, these programs are better than money being stolen by government officials from taxpayers’ money.