CREBA bats for foreign debt condonation

The Chamber of Real Estate and Builders’ Associations (CREBA) urged President Arroyo yesterday to push for inclusion of the Philippines in the US-led initiative for foreign debt condonation, even as it batted for exchange rate stabilization via a pegged currency band.

In a statement, CREBA national president Florentino S. Dulalia Jr. said:

"US President George Bush is currently pushing for the condonation by the IMF, the World Bank and other creditors of two-thirds of the foreign debts of Iraq and Afghanistan. We ask the Arroyo administration to formally request President Bush to include the Philippines in this initiative.

"To our mind, our country rightfully deserves such patronage from the US – more than its erstwhile enemies Iraq and Afghanistan – in view of our close historical ties, and further considering that our government has been one of the US’ few staunch supporters not only in its war against Iraq, but also in its anti-terror campaign and other initiatives.

"Condonation of even a portion of our huge foreign debt would substantially alleviate our fiscal deficit problems and provide considerable relief from the pressure to impose new burdensome taxes.

"The funds that would otherwise be utilized for foreign debt servicing and repayment could be channeled to vital socio-economic programs that would benefit our underprivileged population."

Dulalia continued: "We also urge government to discard the floating exchange rate system in favor of a pegged currency band – similar to that obtaining in China, Japan, Malaysia and other countries – under which the peso may be allowed to fluctuate vis-a-vis the dollar only within a realistically manageable band or level.

"Harrowing experiences in our country and elsewhere have proven that the system of "floating exchange rate with discretionary intervention" is highly detrimental to developing and import-dependent economies such as ours, particularly in situations where the GIR is perennially too limited to afford flexibility vis-a-vis largely uncontrollable global market forces, or to allow successful Central Bank intervention in the face of currency attacks.

"To help ensure success of the pegged currency band, movements in foreign portfolio investments (FPI) – which pose greater danger than benefit to the economy in terms of sudden capital flights and susceptibility to speculative attacks on the currency – should be regulated through, among others, a 90-day holding period and/or an exit tax.

"Such controls, however, should not be made to apply to foreign direct investments (FDIs) which are highly beneficial to the economy.

"We urge government to undertake these measures now, rather than wait for another disaster to strike before acting. For while the global economic situation is relatively quiescent, the prices of our major essential imports, particularly oil, are at an all-time high and the peso is at an all-time low.

"Another peso depreciation is a catastrophe that our people may no longer survive," Dulalia said.