Marcos pledges all-out peso defense as reserves hit two-year low; Meralco flags rate pressure

Philippine President Ferdinand Marcos Jr. pledged on Wednesday that authorities would do everything in their power to halt the peso's slide, a day after the currency sank to a record low against the US dollar and as official foreign reserves fell to their lowest level in roughly two years.

"People can take solace in the fact that our policy towards the peso is to continue to defend the peso as hard as we possibly can," Marcos told reporters in Manila, according to multiple reports. He said the government has "all the means to defend" the currency, which hit a record low of 64.17 to the dollar on Tuesday.

"There was no reason to panic over its weakness," he added. "Our foreign exchange reserves are healthy. And that's what we draw on to defend the peso."

The peso has lost more than 8% against the dollar in the year to date. Business Times reported that Philippine foreign reserves fell to US$99.5 billion in September, the lowest level since September 2023.

Marcos, who met with central bank officials on Tuesday, said monetary measures could only do so much to control inflation, adding that "we have to do others," per Business Times. The central bank raised its key policy rate by a larger-than-expected 50 basis points last week to combat inflation, which it said could be fueled by a weaker peso through higher imports. The central bank governor also said last week that it intervened in the foreign exchange market to smooth out sharp fluctuations.

Bloomberg reported that Marcos attributed the peso's weakness to rising oil and fuel prices and their effect on the economy, telling the public "don't panic." The peso fell to a record low of 64.20 per dollar on Tuesday, according to Bloomberg.

**Meralco warns on rates**

The currency's fall is feeding directly into consumer costs, with the country's largest power distributor warning that electricity rates will rise further.

Manila Electric Co. (Meralco) expects the weakening peso to push electricity rates higher as foreign exchange movements affect the cost of power purchased from generation companies, the company said during a financial briefing on Wednesday.

"Definitely, it will have an impact especially on the pass-through generation costs. More than 50% of our power sources are dependent on forex (foreign exchange) and that will probably increase the generation rates," Meralco Senior Vice-President and Head of Regulatory Management Jose Ronald V. Valles said.

The peso breached the P64-per-dollar level for the first time on Tuesday, closing at a record low of P64.17 against the US dollar, before recovering 14.5 centavos to close at P64.025 on Wednesday.

Meralco's warning comes after it raised its residential electricity rate in October due to higher generation charges. The overall rate increased by P0.3191 per kilowatt-hour (kWh) to P15.0615 from P14.7424 per kWh in September, with the generation charge — the largest portion of a typical customer's bill — rising by approximately 50 centavos per kWh.

In its nine-month financial report, Meralco said the average retail electricity rate increased by 15% to P13.43 per kWh from P11.63 a year earlier, largely due to higher pass-through charges. Generation charges accounted for 65% of the average retail rate, with increases attributed to higher fuel prices, power supply costs, wholesale electricity market charges, and peso depreciation.

Meralco's purchased power costs rose 20% to P338.7 billion from P281.6 billion in the same period last year.

The company's power generation arm, Meralco PowerGen Corp. (MGEN), said further peso depreciation could affect its pipeline projects. "[For] projects that have broken ground, it will have no impact but for projects that have yet to start, [we] need to look out for," MGEN President and Chief Executive Officer Emmanuel V. Rubio said.

Despite the uncertainties, Meralco maintained its consolidated core net income guidance of P56.6 billion for 2026. For the third quarter, consolidated core net income rose 26% to P18.32 billion from P14.49 billion a year earlier, while nine-month core net income increased 12% to P44.83 billion. Revenue grew 19% to P443.04 billion in the nine-month period.

Meralco shares fell P11.80, or 2.67%, to close at P429.80 apiece on Wednesday.

**Economy under strain**

The currency's collapse has darkened the outlook for the broader economy, with one commentator describing the peso as "simply collapsing" and warning that the current worst-case scenario anticipates the P70-per-dollar level being breached soon.

In an opinion column for The Philippine Star, Alex Magno wrote that the peso's rapid fall has brought "a grim atmosphere" to the business community, with this year written off as lost and next year not promising much better. He argued that "geopolitical factors" cited by the Palace as the cause of the falling peso and rising inflation is a "cover-up phrase for 'economic mismanagement,'" noting the Philippines has the worst performing currency and highest inflation rate in a region dependent on imported fuel.

Magno also cited underspending in the public sector following a flood control scandal, with major infrastructure projects falling behind schedule after Congress "mangled the budget for three successive years." He noted that a horrified Supreme Court described the budget abuse as "unconstitutional," and that the House version of the 2027 national budget suffers from the same defects. Congress has two months to avert reenactment of the previous budget.

The rapid erosion of the peso and high inflation threaten to make the proposed 2027 budget academic, Magno wrote, as the cost of everything needed to restart the infrastructure program outstrips original calculations — the road program alone faces cost overruns, with diesel and petroleum-derived asphalt prices rising.