Duterte gov't borrows another P540-B from BSP for pandemic response

MANILA, Philippines — The Bangko Sentral ng Pilipinas is lending money anew to the government to augment funds for the state’s pandemic response.

In a text message on Thursday, BSP Governor Benjamin Diokno said the Monetary Board, the central bank’s policymaking body, approved last July 1 a fresh short-term loan to the government amounting to P540 billion.

Diokno said the new loan has “the same terms and conditions” as the credit line of the same amount that the BSP extended to the government in January. That old loan, which carried zero interest, had since been repaid in June.

The central bank has become a critical cash source for the Duterte administration amid falling tax receipts and a costly pandemic response. In March last year, the BSP bought P300-billion worth of government bonds to augment the state’s pandemic war chest.

After paying back the bonds in September last year, the BSP lent P540 billion to the government in October at zero interest. The loan matured in December, and the government requested to renew the credit line last January.  

Budget department data showed the government is planning to borrow P1 trillion from the BSP. But more than rising liabilities, analysts earlier raised red flags over BSP renewed lending to government, which they said has put the central bank’s independence—and its goal of ensuring inflation remains stable—at risk of getting eroded. For one, cash from government borrowings can feed to the broader financial system and push up prices.

But the BSP argued that its lending to government has become “critical and necessary” to replace the state’s depleting revenue streams due to weak economic activity during the health crisis. — Ian Nicolas Cigaral