BSP ready to lend additional P280 billion to national government

MANILA, Philippines — The government can still borrow an additional P280 billion from monetary authorities to augment its war chest against the pandemic, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

In a virtual press briefing, BSP Governor Benjamin Diokno said Republic Act 11494 or the Bayanihan to Recover as One Act (Bayanihan 2) has given the central bank the authority to provide additional direct provisional advances to the national government.

This would allow the BSP to extend more COVID-19 funding that is equivalent to not more than 10 percent of its average income from 2017 to 2019.

“That’s about P280 billion. And that’s for one year, so longer term and renewable for another year, with the approval of the Monetary Board. But that has to be accessed within the next two years. It’s just really focused on the COVID-19 pandemic,” Diokno said.

According to the BSP chief, the additional allowance is on top of the amount that can be lent by the central bank as provided in its charter, which is equivalent to 20 percent of its average income in preceding fiscal years or about P540 billion.

This would bring the total amount of financing the government can access from the central bank to P820 billion until the period indicated in the Bayanihan 2 Law.

The Monetary Board granted the government on Dec. 28, 2020 a new P540 billion advance credit to support its COVID-19 response efforts “They have not accessed that yet. I think they will access that anytime soon,” Diokno said.

However, he said the national government has not yet sought out the additional P280 billion in funding.

“The provisional advances of the BSP to the national government are a time-bound measure to complement its health and fiscal programs in mitigating the impact of COVID-19,” Diokno said.

“We also reiterate that the BSP’s measures to support the national government’s financing requirements do not constitute a long-term source of funding for government spending. These measures are not expected to result in a permanent increase in the monetary base or in significant inflationary pressures and as such, are not expected to affect the conduct of monetary policy,” he said.

Diokno said the BSP would continue to monitor developments and respond to the needs of the economy to limit any scarring arising from the health crisis.

“The BSP stands ready to deploy additional policy support as necessary, including any further provisional advances as consistent with our charter and the Bayanihan 2 Law,” he said.