Believe you me. Our country’s Central Bank is awash with money and other needed resources to cope with the coronavirus disease 2019 (COVID-19) pandemic. At least, that’s how Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno would like us to appreciate even if we are still reeling from this public health crisis that afflicts the entire world.
Although the COVID-19 pandemic is considered a public health crisis, Diokno described it as a “once-in-a-lifetime crisis unlike other crisis we have faced in the past.” But as soon as the pandemic fades, the BSP chief boldly believes the Philippines “to become nothing less than an economic champion” among the COVID-19 impacted countries.
For sure, the likely reaction of critics, along with skeptics and cynics alike, what is Diokno smoking?
To which the 72-year-old Diokno facetiously retorted: “I never smoked in my life.” The BSP Governor chairs the highest policy-making board in the country that decides on monetary affairs – and fiscal issues at times – especially on money matters that run the Philippine economy.
“It’s really a matter of confidence. We really have to learn to live with the virus. We cannot forever hide in our residences. We have to manage the risks, right? And luckily for us, the incidence of COVID has been declining. Our health facilities have been increasing. So in any event of a surge, we can easily manage them,” Diokno argued.
“So it’s a matter of confidence and owing our citizens to leave their homes. But I fully understand the strategy of the government. We want to save lives and so we impose very strict lockdowns. And so we don’t have the second or third wave that we see now in other countries. And now we waited for the vaccines and we are now waiting for the vaccines to come. So I think everything works out well,” Diokno rebutted.
For starters, Diokno cited the country’s gross international reserves (GIR) recorded the “highest ever” in the history of the BSP. Per latest data of the BSP, the GIR stood at $105 billion, or dollars available that can be used to pay for goods we import from other countries. “The rule of thumb or the doctrine is if we have three months of import requirements, that’s good enough. But we have eleven months of import requirements,” he stressed.
A veteran technocrat, Diokno admitted he has seen so many crises in the past that happened in our country, including the 1990 Asian financial crisis. “And every time we have a crisis, we run out of dollars to service our foreign debts because our peso (vis-à-vis the US dollar) depreciates. So we need more dollars to service our debts. But this time, it did not happen. In fact we have the highest GIR in history,” Diokno pointed out.
During our Kapihan sa Manila Bay zoom webinar last week, the BSP Governor pointed to our country’s strong macro-economic fundamentals as having cushioned us from the “shocks” when the outbreak of COVID-19 contagion struck early on last year. Diokno conceded it was the foreign exchange remittances from our millions of overseas Filipino workers (OFWs) that saved the Philippine economy for the nth time. “Remember when crisis hit us, there was a projection it will decline 20% or more but actually it only declined by 1.5%. That’s how resilient this thing is,” Diokno pointed out. Dubbed as our “modern day heroes,” we honor our OFWs for their sacrifice to work abroad in order to send money to their loved ones and families back home.
“But a lot of dollars are also coming in from investments and borrowing. We borrowed $10 billion. And we were very selective and very careful in our foreign borrowing. Most of our borrowing from Japan, rates ranging from quarter of one percent, with 40 years to repay,” Diokno revealed.
He noted the foreign direct investments (FDI) in the Philippines remained robust despite the deceleration during the last few months in the year just past. In the latest BSP monitoring, FDIs totaled $5.3 billion net inflows from January to October, down by 10.2% from $5.3 billion from a year-ago level. The bulk of equity capital placements, according to the BSP, came from Japan, the Cayman Islands, and the US, and invested mainly in manufacturing, real estate, and information and communication sectors.
“The slowdown in FDI during the month may be attributed in part to concerns over the resurgence of COVID-19 cases in the US, Japan, and some European countries,” the BSP explained. The BSP blamed the adverse impact on investors’ sentiment amid the uncertainties surrounding the effects of the prolonged pandemic on the global economy.
Normally, the BSP chief, explained a crisis triggers loss of confidence and consequent flight of money, especially dollars going out of the country in times of troubled economy or political instability. To stem the impact of the crisis, the BSP calibrates interest rates to discourage or prevent the dollars to leave the country. Currently, Diokno cited, we have the lowest interest rate ever.
“Growth comes from confidence, mobility of people. A major constraint is transport mobility because we have restricted movement,” he pointed out. “As we open the economy, then people can move, can do business,” he cited.
In line with the “whole-of-government” approach in addressing the COVID-19 pandemic, Diokno disclosed the BSP extended provisional cash advances to the national government (NG), not just once but twice last year. The BSP lent out a total of P840 billion to the National Treasury but Diokno informed us the entire amount was fully paid back last year. This is on top of the P40.5 billion dividends remitted to the NG by the BSP. “Bigger than Pagcor,” he bragged.
Meanwhile, Diokno informed us, the BSP has also been purchasing in the secondary market to help shore up domestic liquidity and restore market players confidence to continue participating in primary government security bond auctions.
Obviously, our country’s central bank is awash with money. But still, money can’t buy confidence of Filipinos to get out of their homes.