The latest vow of President Ferdinand Marcos Jr. to defend the peso with the country’s foreign exchange reserves and policy tools invites a question: Has his administration forgotten the costly lessons of the 1997–1998 Asian financial crisis?
“We don’t panic,” Marcos declared, assuring the public that the government has “all the tools” and “all the means” to defend the currency. He pointed to the country’s healthy foreign exchange reserves as ammunition for the fight.
But currencies are not defended by bravado. And reserves, however healthy, are not an inexhaustible war chest.
Marcos would do well to recall what happened when the Philippines last tried to stare down currency speculators.
At the onset of the Asian financial crisis in 1997, as traders kept Southeast Asian currencies under siege, the late Bangko Sentral ng Pilipinas Governor Gabriel Singson took an aggressively defiant stance. Referring to foreign exchange speculators, he famously warned: “We will burn them.”
The BSP raised overnight interest rates to as high as 32 percent to discourage speculation and stem the peso’s fall. The rhetoric was fierce, the interest rates punishing, and the defense costly. Yet the peso plunged by roughly 62 percent in seven months during the Asian financial crisis.
The lesson was brutal. A central bank can spend reserves and raise interest rates, but it cannot intimidate market forces into submission. When economic fundamentals are working against a currency, defiance is no substitute for a viable strategy.
Today, the peso is again under pressure. It closed at a record low of P64.17 per US dollar on October 27, extending its slide despite the BSP’s reported half-percentage-point rate hike to 5.5 percent. From its P58.79 close at the end of 2025, the currency has weakened by about 8.4 percent. In a 9-month span during the 2008 global financial crisis, the peso fell 17 percent.
The causes are hardly mysterious. Higher oil prices mean a larger dollar bill for an import-dependent economy. Middle East tensions add uncertainty, while a stronger US dollar draws capital toward the world’s dominant reserve currency. The Philippines’ persistent trade deficit compounds the problem by sustaining demand for dollars.
These pressures cannot be wished away by presidential assurances.
Marcos has acknowledged as much, describing the inflation problem as supply-driven and conceding that monetary measures “can only go so far.” He is right. Higher interest rates cannot produce oil, fix disrupted supply chains, or erase the country’s dependence on imported energy. They can support the peso, but at the cost of more expensive credit and potentially weaker economic activity.
More troubling is the prospect of depleting foreign exchange reserves in a prolonged effort to defend the currency. Reserves are not merely ammunition for market intervention; they are also a vital buffer that helps the country meet external obligations and maintain confidence in its ability to service foreign debt. A sharp erosion of that buffer could make creditors and investors question whether the Philippines has enough foreign currency to meet its payments. That could push up borrowing costs, trigger further capital outflows, and put even greater pressure on the peso.
In other words, a campaign to defend the currency could end up undermining the very confidence it is meant to protect. A weaker peso is painful. A weakening peso accompanied by dwindling reserves and doubts about external debt repayment would be a far more dangerous proposition.
Nor is depreciation an unmitigated disaster. While it raises the cost of imported fuel, food, machinery, and other essentials, it also increases the peso value of dollar earnings sent home by overseas Filipino workers, including seafarers, and earned by business process outsourcing workers and exporters. These benefits do not cancel out the damage from inflation, and their value depends on each sector’s costs and circumstances.
But they underscore why the objective should not be to defend the peso at any price.
The sensible goal is to prevent disorderly swings, preserve adequate reserves, and address the economic weaknesses driving depreciation—not to turn a particular exchange rate into a test of national pride.
The government should focus on what it can actually change, including reducing vulnerability to imported energy, improving export competitiveness, attracting durable investment, and restoring confidence through credible economic management. Seasonal remittances may bring some relief toward Christmas, but holiday dollars cannot permanently cover a structural external imbalance.
Spanish-American philosopher George Santayana wrote in The Life of Reason (1905): “Those who cannot remember the past are condemned to repeat it.”
The warning applies especially to currency crises. Singson’s defiant declaration did not prevent the peso’s collapse. That history does not mean the BSP should stand idle, nor does it make today’s circumstances identical to those of 1997. It does, however, expose the danger of confusing the willingness to fight currency markets with the ability to win.
Marcos says the government has all the means to defend the peso. Perhaps. But the more important question is whether his administration has a strategy to address why the peso keeps falling—and the discipline to know when defending it becomes counterproductive.
A president can order the peso to stand its ground, but the foreign exchange market doesn’t take orders from Malacañang. And foreign exchange reserves are no bottomless magazine. Burn through them defending the peso, and the country could be left with a battered currency and fewer dollars to pay its debts.
The peso needs economic fundamentals, not presidential bravado. The government’s job is to protect the country’s financial health, not to win a pissing contest with the currency market.
