Friday, September 30, 2011

The Exchange Rate Irony

It's payday. In OFW's vernacular, padala na naman. Coming out of the remittance center, I don't know If I could afford to smile the same way as the child in the left poster does. Having sent money to my family in the Philippines, I should be happy and fulfilled, yet I have a feeling I have been instantly robbed. Thanks to a stronger peso, the equivalent of what I used to send has just gone down. As such, my family received a reduced allowance to cover the same amount of monthly expenses. And the irony of it all, the appreciation of the peso against the greenback is in part because of the cash sent by nearly ten million overseas Filipinos working from around the world.

I have always been stoic when it comes to the negative effects of a strong currency (PHP) . Too much time spent on work has averted me from sharing the same sentiments that majority of OFWs have on padala days. Not until recently when I held a tight grip on my finances and realized how much I am losing everytime the dollar deteriorates against the peso. Simple Math, If I will send 4,000 UAE dirhams to my family today, they will receive approximately PHP 47,000. Had I sent the same amount last month, they would have received PHP 49,000. The difference of PHP 2,000 is due to a weakened dollar which traded at PHP 45.31 as of 31st Aug and plunging down to PHP 43.87 close of business 30th Sept. That amount is already my youngest brother's full month school allowance. In a sense, a strong peso is actually a weak scenario for OFWs and their families.

For all its consolation, a stronger peso is said to benefit the national economy in general. A stronger peso helps reduce the inflation rate and ultimately could lead to decreased prices of utilities, commodities and many other daily needs that the OFW family regularly purchases and consumes. It also spells “good news" for most businesses especially companies who rely on imported raw materials and for those who are investing on call centers, telecoms and BPOs who are buying and bringing in new technology from other countries. It's also a cause to celebrate for companies with huge foreign debts as they have to pay lesser amount for interest charges. In time, a lower exchange rate will translate to general increase in real purchasing power of the consumers and that's including the families of OFWs.

In a strange economy like ours (10% of our GDP is derived from OFW remittances), there are certainly losers and winners in the fluctuation of the exchange rates. But for OFWs and their families, it seems both ways unfavorable. Not only our remittances get curtailed but the supposed benefits of the appreciating peso is yet to be felt by OFW families whose remittance receipt is boosting economy and consumption.

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