Monetary policy essential for nat’l security – BSP

MANILA, Philippines - Monetary policy is essential in strengthening national security as it plays a significant role in promoting sound macroeconomic fundamentals, according to the Bangko Sentral ng Pilipinas’ (BSP).

“[H]igher economic growth translates to increasing nominal resource allotment for defense spending and the other dimensions of national security,” Roy Hernandez, bank officer at the BSP’s department of economic research, said in the BSP newsletter posted at the central bank’s website.

“It is therefore imperative that the stakeholders involved in promoting or protecting the country’s national security be committed to excellence in performing their respective tasks,” he said.

Hernandez explained that one of the vital aspects of national security is economic security, in which monetary and fiscal policies play the key roles.

“Monetary and financial policies are necessary to promote economic security. In recent years, prudent and appropriate use of monetary and financial policies has contributed to the strong macroeconomic fundamentals of the country that paved the way for higher economic growth which help fortify economic and political stability,” he added.

The Philippine economy grew a faster-than-expected 7.2 percent last year, sustaining the 6.8-percent expansion in 2012. This was matched by a benign inflation rate that settled at three percent, the low end of the BSP’s target range.

The country also recorded a balance of payments surplus of $5.01 billion in 2013, while its gross international reserves reached $83.2 billion.

“For the part of the BSP, it should remain vigilant and guard against complacency by remaining committed to its mandate of price and financial stability while being supportive of productive activities,” Hernandez said.

The central bank has time and again expressed its readiness in deploying macro prudential measures or adjusting key policy rates to ensure price and financial stability and see to it that such are conducive to an inclusive economic growth.

In its last policy meeting, the BSP kept key rates steady but hiked the banks’ reserve requirement ratio by one percent age point to mop up liquidity in the system.

The next rate-setting meeting has been slated next week, May 8.

“The concept of national security has evolved from a traditionalist and narrow perspective of protecting the state against external and internal threats to encompass both state and human security,” Hernandez said.

“It is now viewed through the lens of various dimensions that are inter-connected and whose dynamics national security is now measured. One of the important dimensions of national security is economic security,” he added.