When the peso buys less

The Philippine peso closed at a record low of P63.615 against the US dollar on 23 October, a figure that may seem distant from an ordinary household’s concerns. Yet Juan de la Cruz does not need a dollar account or plans to travel abroad to feel its consequences. A weaker peso can reach his family through food, transportation, medicines and electricity.

The explanation is straightforward: More pesos are needed to purchase the same dollar. An imported item costing US$100 requires P5,800 at an exchange rate of P58, compared with P6,361.50, which is more expensive by over P500, at the latest closing rate. Businesses importing fuel, equipment and raw materials face similar increases that may make everything more expensive for consumers.

The Philippines is not alone in facing currency pressure. Indonesia’s rupiah has also traded near historic lows, while expensive oil and global financial uncertainty have weighed on other Asian currencies. However, our neighbors are not affected equally, reflecting differences in energy dependence, investment flows and economic conditions. External pressures explain part of the problem without excusing an inadequate domestic response.

The consequences extend beyond imported consumer products. Farmers use imported fertilizer, deliveries depend on fuel, and electricity generation partly relies on imported energy sources. Exchange-rate movements do not affect every price immediately or equally, but they add pressure when household budgets are already stretched.

For families receiving OFW remittances, the stronger dollar brings an advantage because money sent home converts into more pesos. However, those pesos must meet higher expenses for groceries, transportation, school needs and electricity. The benefit should be measured by what the family can afford, rather than simply the amount received.

Having worked at the Bangko Sentral ng Pilipinas (BSP), I appreciate how hard the institution works to contain inflation and protect purchasing power. On 22 October, the BSP raised its policy rate to 5.5 percent to address broadening price pressures. Higher rates can restrain inflation, but they can also increase borrowing costs for households and businesses, depending on their loan terms.

The BSP has the mandate to preserve confidence and temper disorderly currency movements without exhausting reserves to defend an arbitrary exchange rate. The Department of Finance, in turn, helps sustain credible spending and borrowing plans while coordinating affordable, targeted assistance with the responsible agencies. Relief should follow transparent eligibility rules rather than political discretion.

Agriculture, energy, trade and transport agencies are there to address supply bottlenecks, unnecessary distribution costs and barriers to fair competition. Government should accelerate legitimate projects that strengthen domestic production and reduce dependence on expensive imports, because monetary policy cannot produce additional food or electricity.

In so few words, the entire government must prioritize this and act together. Juan deserves a response that makes sense for his family and brings food to the table. Protecting the peso ultimately means protecting the Filipino family’s ability to live with dignity.

For comments, email darren.dejesus@gmail.com.