MANILA, Philippines – Feeding a piggy bank with loose change may have been considered a Filipino’s practical way to save, but the Bangko Sentral ng Pilipinas said this old-age practice may not be doing the overall economy any good.
In a press conference on Friday, BSP deputy governor Diwa Guinigundo said keeping coins in piggy banks, or unconsciously not using them for daily spending needs, creates an artificial shortage of coins.
An artificial shortage—also called warehousing in industry lingo—forces the central bank to plug the gap, which means additional costs.
"As it is, we have the highest per capita number of coins in Southeast Asia. In other words we have 75 to 100 coins per Filipino but the problem is that we are warehousing these, so we have an artificial shortage," Guinigundo added.
Guinigundo said the BSP has circulated 15.6 billion coins worth P16.9 billion as of 2009, but only a portion of these is being used.
The BSP has to mint more coins to address consistent requests from banks for more supply.
"If we can get more coins circulating, the BSP may mint less coins, thus reducing its expenses. If this happens, the BSP can improve its income, and pay more taxes and remit more dividends to the national government," Guinigundo explained.
The BSP had remitted P6 billion of its P8.93-billion 2008 profit to the government.
The problem of circulating the Philippine currency has long been a concern of the BSP, according to the Sun Star column of Ignacio Bunye, a member of the Monetary Board, BSP’s policy making body.
He wrote that the board had created a special committee called the Currency Management Committee 5 years ago to specifically address the coins supply issue.
Bunye, a former Malacanang spokesman, explained that aside from ending up in piggy banks for a long time, coins are persistently short in supply since Filipinos tend to have a negative attitude and low regard for coins, particularly the lower denominated ones.
This attitude manifests when Filipinos leave the coins at home only to gather dust and, in most cases, forever forgotten. He noted that coins given out as loose change during a transaction tend to attract irritated sighs as these are considered “a hassle” or “excess baggage.”
When coins are used to purchase goods, these go back to circulation and the demand-supply balance for coins remains, he stressed.
Coins also keep prices down. Without a P0.05, for example, Bunye said businessmen would tend to round prices off to the higher value. Thus, a product that costs only P1.95 would end up being sold for P2.00.
Cost of P1.00
Bunye said the BSP suspects that another problem is exacerbating the artificial shortage: smuggling.
He explained that the BSP’s Mint Refinery Operations Division had noted attempts in the past 2 years to smuggle out Philippine coins. A government’s information agency website noted Bunye’s previous report on how perpetrators melted the P0.25 coins and combined these with other metal components to make sinks that are more durable.
Law enforcement agencies had previously intercepted some defaced and mutilated coins about to be shipped to various Asian countries. Smugglers sell these to makers of tokens, computer parts and bullets, according to Bunye.
Smugglers apparently eyed the P1 coin due to increased global demand for copper and nickel.
Both metal contents are present in the old series of the P1 coin but not as high in the newer series. He said the recent ones are now made of nickel-plated and low-value steel, which should discourage smugglers.
Nonetheless, he said the BSP spends around P1.55 to produce the current P1 in circulation. He said metal content costs P0.75 while production cost is at roughly P0.80.
The difference in the coins’ face value and the total production costs (labor plus metal) is even wider in lower denominated coins, such as the P0.25, P0.10 and P0.0.1, Bunye explained.
Plea to politicians, churches
To address the persistent coins problem, the BSP is making its plea to different sectors, including banks, the church, gambling firms, and politicians campaigning for the May 2010 elections.
Bunye encouraged banks not to regard coin deposits as “labor intensive.” He said banks should even encourage their clients to deposit their coins. He also persuaded parents to accompany their kids to the bank to deposit these coins, instead of dropping them in piggy banks.
He made the same plea to charitable institutions that place tin cans beside supermarket and department store cashiers. He said these groups should immediately retrieve the cans and deposit the coins in the bank instead of leaving the coins idle for a prolonged period.
Guinigundo also appealed to groups that are natural repositories of coins due to their business or activity.
“[We] appeal to the church where most of these coins are warehoused and to those running games of chance," he said.
Coins, usually in P1, P5 and P10 denominations, tend to be concentrated in places where illegal gambling, such as jueteng or similar numbers games, reputedly proliferates.
Guinigundo said it expects demand for coins especially the P1.00 and P10.00 denominations to increase with the coming elections. "The public should cooperate by recycling, by getting these coins out of their shelves.
The appeal came amid preparations by the BSP to redesign all coins and notes.
"We will make a public announcement later on as to the schedules of the demonetization," Guinigundo said.
When new coins are introduced, the older ones are phased out over a pre-determined period.
"The significance of this is that for the next 3 years there will be a co-generation of the old and new currency designs, but after that, there will be a demonetization of the old ones so people have to start recycling them," he said.
Proposals for new sets of currencies triggered the redesign of coins. One of the proposals is a new P500 bill that will carry the face of the late President Corazon Aquino side-by-side her husband’s. Benigno “Ninoy” Aquino Jr’s face is currently printed on the bill.
Guinigundo explained that, as a rule of thumb, monetary officials change the design of money every 10 years, partly to give counterfeiters a hard time.