Embarrassment of riches: bigger reserves will increase losses

Article Abstract:

The recovery of the Philippine export sector may be delayed by the conservative financial reform moves being implemented by the government. Exporters are hindered by high prevailing interest rates as a result of problems encountered by the Central Bank of the Philippines. The bank's financial problems stem from unsound business practices it was forced to implement, such as the purchase of dollars as a limit on peso appreciation. The foreign reserve is used for debt servicing and the purchases present new problems pertaining to the liquidity of the peso.

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A nettle to grasp: remedies may be politically unpalatable

Article Abstract:

The World Bank has proposed significant measures to effect control of the problems of the Central Bank of the Philippines. However, the moves entail legislative motions and implementation of politically unpopular reform initiatives. These include cuts in governement spending and additional taxes, as well as increased capitalization for the bank and reallotment of financial resources. These measures should reinforce two previous control and reform initiatives involving changes in deposit and foreign reserve management.

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