Philippine pesos

The Philippine peso, also referred to by its Tagalog name ''piso'' (Philippine English: , , plural pesos; tl, piso ; sign: ₱; code: PHP), is the official currency of the Philippines. It is subdivided into 100 ''sentimo'', also called centavos.

The Philippine peso sign is denoted by the symbol "₱", introduced under American rule in place of the original peso sign "$" used throughout Spanish America. Alternative symbols used are "PHP", "PhP", "Php", or just "P".

The monetary policy of the Philippines is conducted by the Bangko Sentral ng Pilipinas (BSP), established on July 3, 1993, as its central bank. It produces the country's banknotes and coins at its Security Plant Complex, which is set to move to New Clark City in Capas, Tarlac."Overview of the BSP"
Bangko Sentral ng Pilipinas (BSP) Official Website. Retrieved on October 1, 2013.

History

The Philippine peso is derived from the Spanish peso or pieces of eight brought over in large quantities from Spanish America by the Manila galleons of the period from the 16th century to the 19th. From the same Spanish peso or dollar is derived the various pesos of Spanish America, the dollars of the US and Hong Kong, as well as the Chinese yuan and the Japanese yen.

Pre-colonial coinage

The trade the pre-colonial tribes of what is now the Philippines did among themselves with its many types of pre-Hispanic kingdoms (kedatuans, rajahnates, wangdoms, lakanates and sultanates) and with traders from the neighboring islands was conducted through barter. The inconvenience of barter, however, later led to the use of some objects as a medium of exchange. Gold, which was plentiful in many parts of the islands, invariably found its way into these objects that included the Piloncitos, small bead-like gold bits considered by the local numismatists as the earliest coin of the ancient peoples of the Philippines, and gold barter rings. The original silver currency unit was the rupya or rupiah, brought over by trade with India and Indonesia.

Two native Tagalog words for money which survive today in Filipino were ''salapi'' and possibly ''pera''. ''Salapi'' is thought to be from ''isa'' (one) + ''rupya'' which would become ''lapia'' when adapted to Tagalog. Alternately, it could be from Arabic ''asrafi'' (a gold coin, see Persian ashrafi) or ''sarf'' (money, money exchange). ''Pera'' is thought to be from Malay ''perak'' (silver), which also has a direct cognate or adaptation in Tagalog/Filipino as ''pilak''. Alternately, it could be from 10 and 5 ''centimo'' coins of the Spanish peseta, known as the '' perra gorda'' and '' perra chica''.

Spanish colonial period

The Spanish dollar or silver peso worth eight reales was first introduced by the Magellan expedition of 1521 and brought in large quantities after the 1565 conquest of the Philippines by Miguel López de Legazpi. The local salapi continued under Spanish rule as a toston or half-peso coin. Additionally, Spanish gold onzas or eight- escudo coins were also introduced with identical weight to the Spanish dollar but valued at 16 silver pesos.

The earliest silver coins brought in by the Manila galleons from Mexico and other Spanish American colonies were in the form of roughly-cut cobs or macuquinas. These coins usually bore a cross on one side and the Spanish royal coat-of-arms on the other. These crudely-made coins were subsequently replaced by machine-minted coins called Columnarios (pillar dollars) or “dos mundos (two worlds)” in 1732 containing 27.07 grams of 0.917 fine silver (revised to 0.903 fine in 1771).

Fractional currency was supplied by cutting the Spanish dollar coin, most commonly into eight wedges each worth one Spanish real. Locally produced crude copper or bronze coins called cuartos or barrillas (hence the Tagalog/Filipino words ''cuarta'' or ''kwarta'', "money" and ''barya'' "coin" or "loose change") were also struck in the Philippines by order of the Spanish government, with 20 cuartos being equal to one real (hence, 160 cuartos to a peso). The absence of officially minted cuartos in the 19th century was alleviated in part by counterfeit two-cuarto coins made by Igorot copper miners in the Cordilleras.

A currency system derived from coins imported from Spain, China and neighboring countries was fraught with various difficulties. Money came in different coinages, and fractional currency in addition to the real and the cuarto also existed. Money has nearly always been scarce in Manila, and when it was abundant it was shipped to the provinces or exported abroad to pay for exports. An 1857 decree requiring the keeping of accounts in pesos and centimos (worth 1/100th of a peso) was of little help to the situation given the existence of copper cuartos worth 160 to a peso.

19th century Gold/Silver Bimetallic standard

The Spanish gold onza (or 8- escudo coin) was of identical weight to the Spanish dollar but was officially valued at 16 silver pesos, thus putting the peso on a bimetallic standard, worth either the silver Mexican peso (27.07 g 0.903 fine, or 0.786 troy ounce XAG) or 1/16th the gold onza (1.6915 g 0.875 fine, or 0.0476 troy ounce XAU), with a gold/silver ratio of 16. Its divergence with the value of gold in international trade featured prominently in the continued monetary crises of the 19th century. In the 1850s the low price of gold in the international markets triggered the outflow of silver coins. In 1875 the adoption of the gold standard in Europe triggered a rise in the international price of gold and the replacement of gold coins with silver Mexican pesos.

As the price of silver fell further, Mexican peso imports were forbidden from 1877, and only Mexican pesos dated 1877 or earlier were legally equivalent to Philippine-minted pesos and ''peso fuerte'' banknotes. However, Spain and its colonies failed to establish a proper gold standard. The Philippine peso and the Spanish ''duro'' (Spain's "peso" or five-peseta coin) thus went on a ''fiduciary coin'' (or fiat coin) standard; while worth more than the Mexican peso due to its scarcity in circulation, both coins traded at a fluctuating discount versus the gold peso. While pre-1877 Mexican pesos were reminted into Philippine 10-, 20- and 50-centimo coins until the 1890s, these coins were continuously smuggled in connivance with Customs officials due to their higher fiat value in the Philippines.

After 1898 the United States colonial administration repealed this "fictitious gold standard" in favor of the unlimited importation of Mexican pesos, and the Philippine peso became a silver standard currency with its value dropping to half a gold peso.

Concurrent with these events is the establishment of the Casa de Moneda de Manila in the Philippines in 1857, the mintage starting 1861 of gold 1, 2 and 4 peso coins according to Spanish standards (the 4-peso coin being 6.766 grams of 0.875 gold), and the mintage starting 1864 of fractional 50, 20 and 10 centimo silver coins also according to Spanish standards (with 100 centimos containing 25.96 grams of 0.900 silver; later lowered to 0.835 silver in 1881).

In 1897 Spain introduced 1-peso silver coins with the bust of King Alfonso XIII, as well as 5- and 10-''centimos de peseta'' coins for circulation in the Philippines as 1- and 2-''centimos de peso''. The Spanish-Filipino peso remained in circulation and were legal tender in the islands until 1904, when the American authorities demonetized them in favor of the new US-Philippine peso.

The first paper money circulated in the Philippines was the Philippine peso fuerte issued in 1851 by the country's first bank, the El Banco Español Filipino de Isabel II. Convertible to either silver pesos or gold onzas, its volume of 1,800,000 pesos was small relative to about 40,000,000 silver pesos in circulation at the end of the 19th century.

A fanciful etymology for the term ''pera'' holds that it was inspired by the Carlist Wars where Queen Isabel II was supposedly called ''La Perra'' (The Bitch) by her detractors, and thus coins bearing the image of Isabel II were supposedly called ''perras'', which became ''pera''. A less outlandish Spanish origin, if the term is indeed derived from Spanish, could be the Spanish coins of 10- and 5-''centimos de peseta'' (valued locally at 2- and 1-''centimos de peso'') which were nicknamed '' perra gorda'' and '' perra chica'', where the "bitch" or female dog is a sarcastic reference to the Spanish lion. Arguments against either theory are that the coins bearing the face of Isabel II were nicknamed ''Isabelinas'' and that the ''perra'' coins were only introduced to the Philippines in 1897.

Revolutionary Period

Asserting its independence after the Philippine Declaration of Independence on June 12, 1898, the ''República Filipina'' (Philippine Republic) under General Emilio Aguinaldo issued its own coins and paper currency backed by the country's natural resources. The coins were the first to use the name ''centavo'' for the subdivision of the peso. The island of Panay also issued revolutionary coinage. After Aguinaldo's capture by American forces in Palanan, Isabela on March 23, 1901, the revolutionary peso ceased to exist.

American Colonial Period

After the United States took control of the Philippines, the United States Congress passed the Philippine Coinage Act of 1903, established the unit of currency to be a theoretical gold peso (not coined) consisting of 12.9 grains of gold 0.900 fine (0.0241875 XAU). This unit was equivalent to exactly half the value of a U.S. dollar. Its peg to gold was maintained until the gold content of the U.S. dollar was reduced in 1934. Its peg of ₱2 to the U.S. dollar was maintained until independence in 1946.

The act provided for the coinage and issuance of Philippine silver pesos substantially of the weight and fineness as the Mexican peso, which should be of the value of 50 cents gold and redeemable in gold at the insular treasury, and which was intended to be the sole circulating medium among the people. The act also provided for the coinage of subsidiary and minor coins and for the issuance of silver certificates in denominations of not less than 2 nor more than 10 pesos (maximum denomination increased to 500 pesos from 1905).

It also provided for the creation of a gold-standard fund to maintain the parity of the coins so authorized to be issued and authorized the insular government to issue temporary certificates of indebtedness bearing interest at a rate not to exceed 4 percent per annum, payable not more than one year from date of issue, to an amount which should not at any one time exceed 10 million dollars or 20 million pesos.

The US territorial administration also issued Culion leper colony coinage between 1913 and 1930.

Commonwealth Period

When the Philippines became a U.S. Commonwealth in 1935, the coat of arms of the Philippine Commonwealth was adopted and replaced the arms of the U.S. Territories on the reverse of coins while the obverse remained unchanged. This seal is composed of a much smaller eagle with its wings pointed up, perched over a shield with peaked corners, above a scroll reading "Commonwealth of the Philippines". It is a much busier pattern, and widely considered less attractive.

World War II

In 1942, at the height of the resistance against the Japanese invasion in Corregidor island, US-Philippine forces managed to ship off to Australia most of the gold and significant assets held in reserve by Manila's banks, but they had to discard an estimated ₱ 15 million worth of silver pesos into the sea off Caballo Bay rather than surrender it to the Japanese. After the war these assets would be returned to Philippine banks, and most of the discarded pesos would be recovered but in badly corroded condition.

The Japanese occupiers then introduced fiat notes for use in the Philippines. Emergency circulating notes (also termed "guerrilla pesos") were also issued by banks and local governments, using crude inks and materials, which were redeemable in silver pesos after the end of the war. The puppet state under José P. Laurel outlawed possession of guerrilla currency and declared a monopoly on the issuance of money and anyone found to possess guerrilla notes could be arrested or even executed. Because of the fiat nature of the currency, the Philippine economy felt the effects of hyperinflation.

Combined U.S. and Philippine Commonwealth military forces including recognized guerrilla units continued printing Philippine pesos, so that, from October 1944 to September 1945, all earlier issues except for the emergency guerrilla notes were considered illegal and were no longer legal tender.

Independence and the Central Bank of the Philippines, 1949–1993

Republic Act No. 265 created the Central Bank of the Philippines (now the Bangko Sentral ng Pilipinas) on January 3, 1949, in which was vested the power of administering the banking and credit system of the country. Under the act, all powers in the printing and mintage of Philippine currency was vested in the CBP, taking away the rights of the banks such as Bank of the Philippine Islands and the Philippine National Bank to issue currency.

The Philippines faced various post-war problems due to the slow recovery of agricultural production, trade deficits due to the need to import needed goods, and high inflation due to the lack of goods. The CBP embarked on a fixed exchange system during the 1950s where the peso's convertibility was maintained at ₱2 per US$1 by various measures to control and conserve the country's international reserves.

This system, combined with other “Filipino First” efforts to curtail importations, helped reshape the country's import patterns and improve the balance of payments. Such restrictions, however, gave rise to a black market where dollars routinely traded for above ₱3/$. The CBP's allocation system which rations a limited supply of dollars at ₱2/$ to purchase priority imports was exploited by parties with political connections. Higher black market exchange rates drove remittances and foreign investments away from official channels.

By 1962 the task of maintaining the old ₱2/$ parity while defending available reserves has become untenable under the new Diosdado Macapagal administration, opening up a new ''decontrol era'' from 1962 to 1970 where foreign exchange restrictions were dismantled and a new free-market exchange rate of ₱3.90/$ was adopted since 1965. This move helped balance foreign exchange supply versus demand and greatly boosted foreign investment inflows and international reserves. However, a weak manufacturing base that can't capture market share in (mostly imported) consumer goods meant that devaluation only fueled inflation, and by the time the decontrol era ended in 1970 another devaluation to ₱6.43/$ was needed.

In 1967, coinage adopted Filipino language terminology instead of English, banknotes following suit in 1969. Consecutively, the currency terminologies as appearing on coinage and banknotes changed from the English ''centavo'' and ''peso'' to the Filipino ''sentimo'' and ''piso''. However, ''centavo'' is more commonly used by Filipinos in everyday speech.

The CBP's final era from 1970 until the BSP's reestablishment in 1993 involved a ''managed float system'' with no more fixed parity commitments versus the dollar. The CBP only committed to maintain orderly foreign exchange market conditions and to reduce short-term volatility. Difficulties continued throughout the 1970s and 1980s in managing inflation and keeping exchange rates stable, and was complicated further by the CBP lacking independence in government especially when the latter incurs fiscal shortfalls. The worst episode occurred when a confidence crisis in the Ferdinand Marcos administration triggered a capital flight among investors between August 1983 to February 1986, nearly doubling the exchange rate from ₱11/$ to ₱20/$ and also doubling the prices of goods.

Reorganization to the new Bangko Sentral ng Pilipinas

Positive political and economic developments in the 1990s paved the way for further economic liberalization and an opportunity to unburden the central bank of objectives that are inconsistent with keeping inflation stable. The New Central Bank Act (Republic Act No 7653) of June 14, 1993 replaces the old CBP with a new Bangko Sentral ng Pilipinas mandated explicitly to maintain price stability, and enjoying fiscal and administrative autonomy to insulate it from government interference. This, along with the further liberalization of various foreign exchange regulations, puts the Philippine peso on a fully floating exchange rate system. The market decides on the level in which the peso trades versus foreign currencies based on the BSP's ability to maintain a stable inflation rate on goods and services as well as sufficient international reserves to fund exports. Black market exchange rates as seen in the past are now nonexistent since official markets now reflect underlying supply and demand.

The Philippine peso has since traded versus the U.S. dollar in a range of ₱24–46 from 1993 to 1999, ₱40–56 from 2000 to 2009, and ₱40–54 from 2010 to 2019. The previous 1903–1934 definition of a peso as 12.9 grains of 0.9 gold (or 0.0241875 XAU) is now worth ₱2,266.03 based on gold prices as of November 2021.

Names for different denominations

The smallest currency unit is called centavo in English (from Spanish ''centavo''). Following the adoption of the "Pilipino series" in 1967, it became officially known as ''sentimo'' in Filipino (from Spanish '' céntimo''). However, "centavo" and its local spellings, ''síntabo'' and ''sentabo'', are still used as synonyms in Tagalog. It is the most widespread preferred term over ''sentimo'' in other Philippine languages, including Abaknon, Bikol, Cebuano, Cuyonon

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