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Historial Exchange Rate Regime of Asian Countries

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Philippines

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Philippine Peso is the currency of the Philippines. The Central Bank of the Philippines, the Bangko Sentral ny Pilipinas (BSP) administers foreign exchange controls and all other currency problems in the Philippines. The former Marcos government of Philippines, known for its corruption, always aimed at retaining the foreign exchange earnings from traditional exporters. From 1970 to 1984, the Philippines had an intermittent history of multiple rate structure with different rates to foreign exchange transactions for exports, imports and foreign debts, on the basis of a daily "Guided Rate". From 1970 till 1973, traditional exporters were required to surrender 80% of the foreign exchange earning at a "Official Rate" fixed at 3.9, which is more disadvantageous to exporters than other rates. This requirement was later replaced by a stabilization tax on traditional exports, which also worked to siphon off the gains of traditional exports. (Bautista, 1987) In mid 1980s, with the economic takeoff of the neighbouring Asia-Pacific area, the Philippines witnessed the importance of removing distortions in its economic regimes and opening up the highly protected economy. Also partly due to the 1983 financial crisis, in 1984 the multiple rate structure was abolished. Ever since then, the Philippines has maintained a floating exchange rate regime. An Inter-bank Rate, determined on the basis of supply and demand in the exchange market, has governed all transactions. The authorities intervene in the medium to maintain orderly market conditions and the political objectives. In addition, the Bankers Association maintains a Reference Rate as the Peso-U.S. Dollar convention rate for customs valuation purposes and for computation of import duties/taxies. Major sources of reference include:
*

1. World Currency Yearbook. (WCY) 2. Annual Report on Exchange Arrangement and Exchange Restriction. (IMF) 3. Romeo M. Bautista (1987): Production Incentives in Philippine Agriculture: Effects of Trade and Exchange Policies. Peso per U.S. Dollar 3.900

Date

Changes to the exchange rate regime

8 The fluctuating free rate was abolished. (WCY, 1984, p.614) November 1965 21 A multiple rate structure with a Mixed Rate (not explained in WCY) February was reinstated based on a controlled, floating Official Free 1970 Flucturating "Guided" Rate. (WCY, 1984, p.614) . The daily "Guided Rate" was establishedby the Bankers' Association. (IMF 1976, p.369). 80% of foreign exchange earnings from some traditional exports (including copra, sugar, logs, and copper concentrates) were to be surrendered to the Central Bank at the Official Rate of P3.90 per U.S. Dollar, while the remaining 20% could be sold at the free market rate. (Bautista, 1987, p.24) May 1970 The requirement of surrender 80% of export earnings was replaced by a stabilization tax on traditional exports. (Bautista, 1987, p. 24)

5.500

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22 September 1970 20 The gold content of the Peso was cut 7.89%, paralleling the U.S. December Dollar devaluation. 1970 26 April 1972 13 The gold content of the Peso was cut 10%, in the aftermath of the February U.S. Dollar devaluation. (WCY 1984, p.614) 1973 31 December 1974 1975 In spot transactions between commercial banks and customers, the maximum and minimum spot buying rates are 0.5% and 1% below the guiding rate, respectively. The minimum and maximum spot selling rates are 0.75% and 1.25 % above the guiding rate, respectively. (IMF 1976, p.369)

6.435

6.780

7.070

31 December 1975 31 December 1976 1977 For spot transactions in excess of US$100,000 between banks and their customers, the margins are competitively determined. (IMF 1978, p.331)

7.510

7.440

31 December 1977 31 December 1978 31 December 1979 31 December 1980 31 December 1981 31 December 1982

7.380

7.380

7.420

7.600

8.200

9.170

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23 June 1983 5 October Inter-bank trading in foreign exchange was suspended. The 1983 "Guided" Rate was phased out in favor of a controlled, floating Effective Rate. (WCY 1984, p.614) 31 December 1983 1984 6 June 1984 All spot buying and selling margins were to be determined on a competitive basis. (IMF 1985, p.400) The exchange rate system was revised into a de facto multiple rate structure as follows: The Effective Rate applied only to essential imports and interest on the foreign debt. Based on a 10% tax on the purchase of foreign exchange, an exchange for other transactions. An exchange rate for export proceeds. The Black Market Rate was officially recognized as the major source of foreign exchange. (The exchange rate for purchase of exchange in other transactions: 19.80; Export proceeds were exchanged at P16.20 per U.S. dollar; The Black Market Rate: P20.00-P24.00) (WCY 1985, p.669) 10 October The multiple rate structure was abolished. 1984 * Inter-bank trading in foreign exchange was resumed. An Interbank Rate, determined on the basis of supply and demand in the exchange market, was to govern all transactions. Authorities intervene when necessary to maintain orderly conditions. (WCY 1990-1993, p.510) 13 The Peso-U.S. Dollar guiding rate was abolished. (IMF. 1986. p.422) December 1984 31 December 1984 29 March The Central Bank announced that, the reference rate of the Bankers 1985 Association should be the Peso-U.S. Dollar conversion rate for customs valuation purposes and for computation of import duties/taxies. (IMF. 1986. p.422) 31 December 1985 31 December 1986 31 December

11.000 14.000

14.000

18.000

19.760

19.030

20.530

20.800

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1987 31 December 1988 31 December 1989 13 Guidelines were issued that the buying rate for spot transactions September must not be less than 1% below the reference rate of the Bankers' 1990 Association, while the spot selling rate must not be more than 2% above the reference rate. For transactions other than spot, the buying rate must not be less than 1% below the spot buying rate, while the selling rate must not be more than 1% above the spot selling rate. (IMF. 1991, p.398) 31 October 1990 31 December 1990 28 January The margins for spot buying and selling rates for commercial 1991 reference transactions around the official reference rate were eliminated. (IMF. 1991, p.400) 31 December 1991 30 July 1992 31 December 1994 31 December 1995 15 March The authorities allowed the Peso to float more freely against the 1998 dollar by lifting the volatility bank system. The band include a 6% limit around the exchange rate of the previous day, with trading being suspended for the remainder of the day if the limit was reached. (IMF 1999, p. 683) Notes: Throughout the course, the Philippine authority posted an Official Rate of P3.90 per U.S. Dollar. This rate was originally used for exporters to surrender their exchange earnings to the Central Bank since 1965. However, this rate is now left inoperative since the exporters are not required to render their export earnings any more. (WCY 1986-1987, p.511)
*

21.340

22.440

28.000 28.000

26.650

A system of eight-hour continuous interbank foreign exchange trading under the Philippine Dealing System (PDS) was introduced. (IMF. 1993, p.405) 24.418

26.214

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