Philippines Blames Hoarding for Shortage|
October 26, 2011
This article was originally printed in World Coin News.
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The Bangko Sentral ng Pilipinas, or Philippines Central Bank, is blaming the its ongoing coin shortage on the hoarding of it coinage by the public, although the reasons for the hoarding have yet to be identified.
BSP Deputy Governor Diwa Guinigundo commented to the Aug. 22 Manila Standard Today, “If the coins were circulating more effectively, the Bangko Sentral would not have to mint more coins. This would enable the Bangko Sentral to save hundreds of millions [of pesos] and remit a bigger dividend to the national government.”
Regardless of the size of the dividend the bank remits to the national government, the facts according to the BSP appear to be that only about 10 percent of the estimated 18.9 billion individual coins now in circulation actually circulate. If this figure is true, there is a problem. According to the central bank’s own statistics, this equals about 176 coins per person throughout the Philippines as compared to less than 100 coins per person in other Asian countries.
BSP data indicates that the face value of coins now in circulation is about 18.9 billion pesos. The coins meant to circulate are in denominations of 5, 10 and 25 centavos and 1, 5 and 10 pesos. In the Aug. 22 The Philippine Star Guinigundo said, “It is not the amount of coins in the system, the recirculation of coins is the problem.”
According to The Philippine Star, “The Bangko Sentral ng Pilipinas has tagged video game machines, karaoke machines, automated machines that dispense water or coffee, contributions in churches, as well as the illegal numbers game or jueteng as the major cause of the artificial shortage of coins in the financial system.”
Perhaps some coins are going this route, but the bottom line for the BSP is that it costs 2 pesos to mint a coin. This means there are four coin denominations now in use that cost more to produce than their face value. Guinigundo has said nothing about finding a way to reduce the cost of coinage production, although he did say 713 million coins with a face value of 753 million pesos were delivered to banks from the mint during the first seven months of 2011.
About the only adjustment the Philippine mint has made in recent years was to change the composition of the 1 peso denomination from copper to nickel when in 2006, it was discovered an international syndicate was smuggling the coins out of the country to be melted for their scrap metal content.
There are other hints that the public may not be the only obstacle the central bank is addressing. BSP Deputy Governor Nestor Espenilla Jr. stated in the Aug. 22 Manila Standard Today, “In view of the limited circulation of Philippine coins in the economy, banks are enjoined to perform their duties as authorized agent banks of the BSP, as sole issuer of Philippine currency, by accepting without handling fees or charges, non-mutilated coins for deposit from the public, regardless of amount.”
The article added, “Banks were also directed to re-circulate the coins received from the depositing public in the course of their business to the economy.”
The new coins distributed to local banks so far during 2011, according to the bank deputy governor, were produced due to the low velocity of coinage circulation rather than due to wear on existing coins. Espenilla issued Circular Letter 2011-059 Aug. 12, which directs local Philippine banks to comply with the central bank’s Clean Note Policy and Coin Recirculation Program.
Espenilla said, “In order to ensure that banks comply with the Clean Note Policy and Coin Recirculation Program, banks are required to incorporate measures on the implementation thereof in their compliance program.” The central bank has mandated local banks to accept “unfit” coins and bank notes and withdraw them from circulation. Banks are also required to arrange a direct exchange of their excess fit coins and bank notes under Memorandum 2007-027 issued during September 2007.
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