BSP approves new budget support for P300-B NG – Manila bulletin
The Bangko Sentral ng Pilipinas (BSP) has granted a new 300 billion pesos loan to the national government (NG) for budget support and the response to COVID-19, lower than previous interim advances of 540 billion pesos, according to the Governor of BSP Benjamin E. Diokno.
Diokno said Thursday, Jan.6, that the reduced loan amount they recently approved signals an unwinding of the BSP’s extraordinary measures as part of its anti-pandemic response.
When asked if he expects a further reduction in BSP’s NG budget support in 2022, Diokno said: âThis is our expectation. It will depend on the Ministry of Finance (DOF).
In addition to the liquidation of the NG provisional advances, the BSP has also gradually reduced its purchases of government securities (GS) since last year as part of the post-pandemic exit strategy or âpandexitâ.
Diokno said that in December, BSP’s daily GS purchases “slowed” to P282 million from its peak of P14.7 billion daily GS purchases in June 2020. At the time, BSP had opened a daily window of one hour as emergency liquidity measures to support the government bond market. âAs market conditions normalize, purchases of BSP on the government secondary market have also declined,â he added.
The BSP Monetary Council approved on December 16 the new NG loan, at zero interest and payable in three months. The DOF has already repaid its previous loan of 540 billion pesos on December 10, ahead of the January 12 due date.
Diokno said the Monetary Board approved NG’s request “shortly after the NG fully paid its outstanding bond” of 540 billion pesos.
“By approving NG’s request, the Monetary Council has recognized that the tax authorities must continue to use the available policy space in order to support the economic recovery,” he told reporters during his online press briefing. regular, adding that NG’s continued support is needed, especially with the spread of new COVID-19 variants.
However, the BSP chief said he would “gradually unwind his direct financial support” to NG as “public finances improve”. He also noted that it was an “encouraging sign of improving public finances” when the NG asked for just 300 billion pesos in January against previous advances of 540 billion pesos.
The BSP charter allows it to extend interim advances as a temporary arrangement with the government for cash resources while revenue generation is still relatively insufficient due to the pandemic and lockdowns.
The first loan was granted in March 2020 for an amount of 300 billion pesos. The following extensions were increased to 540 billion pesos in October 2020, January 2021 and April 2021.
The provisional amount of 300 billion pesos can be extended for three months after it expires. National Treasurer Rosalia V. De Leon said the DOF intended to repay the loan by the end of June this year.
During the press conference, Diokno reiterated that the BSP will continue to be patient in its political actions to support the dynamics of the economy in the coming quarters.
“BSP will continue to focus on finding a delicate balance between providing adequate support to the economy and preventing the build-up of inflationary pressures and risks to financial stability,” he said. he declares.
As GDP growth shows more sustained sighs, the BSP will gradually withdraw its support for monetary policy and other interventions.
âWe reiterate that interim advances have always been designed as a temporary intervention. Looking ahead, the timing and conditions for unwinding monetary stimulus will continue to be guided by the medium-term inflation and growth prospects and the risks surrounding those prospects, âDiokno said.
In line with BSP’s data-driven approach to policymaking, the exit strategy will also primarily depend on the development of various domestic factors, including liquidity and credit dynamics, financial sector risks. and the state of public health, as well as changing global developments and potential fallout, Diokno said.
The BSP Charter, in particular Article 89 of Republic Law No. 7653 (the âNew Central Bankâ Law) as amended, allows the BSP to provide âvital support to the government in times of crisis. crisis, with appropriate guarantees â.
The BSP can advance to the government a maximum of 20% of the GN’s average income over the last three years, from 2017 to 2019. This amounts to approximately 564 billion pesos.
The second âBayanihan To Recover As Oneâ law has enabled the NG to contract additional cash advances from the BSP which will represent 10% of the average government income over the past three years. It is about 282 billion pesos and has a duration longer than one year.
The BSP law and the second Bayanihan law combined enabled the NG to benefit from provisional advances in the amount of 846 billion pesos.
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