Dominguez cites multiplier effects of Bayanihan 2

MANILA, Philippines — Beefing up the capital of government financial institutions (GFIs) as proposed under the Bayanihan 2 bill is expected to have a robust multiplier effect, with as much as P600 billion in economic activity seen to be generated, according to the Department of Finance (DOF).

Finance Secretary Carlos Dominguez said the government is pushing for the infusion of about P50 billion in additional capital to government banks under the proposed P140 billion stimulus package or the Bayanihan to Recover as One Act.

This measure will allow GFIs, particularly the Land Bank of the Philippines and Development Bank of the Philippines, to serve as rediscounting agents for small and medium-sized banks and microfinance institutions.

Dominguez said the proposal is projected to have a multiplier effect of eight to 10 times for every peso released.

“For the bank program, we are requesting P50 billion. We figured that the multiplier effect of that is between eight and 10 times. Let’s say eight times, so that’s P400 billion worth of economic activity,” Dominguez said.

He said the government is also seeking P5 billion in additional capital for the Philippine Guarantee Corp. (PhilGuarantee) for the credit guarantee program for micro, small and medium enterprises.

“The multiplier effect of the additional capital in the guarantee program is around 20 times. So the P5 billion can generate probably P100 billion worth of activities,” Dominguez said.

“So if you add the two, you would probably end up anywhere between P400 billion and P600 billion in economic activity,” he said.

In Congress, the version of the Bayanihan 2 bill that is closest to the DOF’s proposal is the one approved by the Senate last July 28. The bill provides a standby fund of P140 billion for the government’s coronavirus response efforts.

The House of Representatives last week also approved its own version of the bill, which is much higher than the Senate’s at P162 billion.

Under the proposal, P50 billion will be extended to GFIs, particularly Landbank (P30 billion), DBP (P15 billion), and PhilGuarantee (P5 billion).

Dominguez said the P140 billion Bayanihan 2 bill forms part of the P180 billion fiscal stimulus package being pushed by the government to deal with the impact of the pandemic.