Fil C. Sionil
The buzzwords now right: “Tight liquidity.”
There is tightness in liquidity both for us ordinary consumers due to lack of water supply and in the market place with corporates lining up to raising funds to bank roll infrastructure projects and/or pay up maturing obligations.
The slack in the delivery of a need as basic as water cuts across all sectors of society. It’s a great equalizer. The shout-outs of those living in posh villages, condominiums, and lower income communities is the same: “Tubig!”
No power, no water. I saw a long queue of people when I went around the affected areas in the metropolis at the outset of the supply distribution problem.
Difficult is an understatement. Your daily life is at a standstill. Small businesses like distilled drinking water, car wash, laundrymats, “karinderas” temporarily closed.
Friends and colleagues whose houses are being serviced by Manila Water tell me the water delivery interruption schedule has been put in place while they’re sleeping. It’s not back to normal yet, but It’s a relief.
There is also tightness in liquidity in the market place. A number of chief finance officers and treasury officials whose companies are planning to raise funds through syndicated loans or corporate bond issues to bankroll their projects and/or refinance maturing obligations have to line up as well.
The liquidity in the market has shrunk after the government borrowed some P236 billion worth of retail treasury bonds the week just past. Bank withdrawals to fund the campaign of those seeking a legislative seat are likewise taking their toll.
An insider from one of the six underwriters – Security Bank Capital, BDO, RCBC, BPI, China Bank Capital, and Philippine National Bank – engaged by a food and beverage conglomerate to handle its bond float with tenors 3-5-7 years is looking forward to the possibility that the Bangko Sentral ng Pilipinas (BSP) will reduce the reserve requirement on bank deposits and deposit liabilities to release money into the system.
BSP Governor Benjamin Diokno has said the prospects of cutting the level of deposits banks are mandated to keep in the BSP vault by one percentage point looms in the horizon over the coming quarters largely because of the downward movement in inflation.
Among its regional peers, the Philippines has one of the highest reserve requirements ratio at 18 percent. And for every one percentage reduction as much as P100 billion is freed into the financial system. In March, 2018, the Monetary Board cut the reserve requirement to 19 percent and another one percentage point to its current level of 18 percent in June.
The view is there’s a lag of between 10 and 14 months for the system to process fully the two percentage points cut in reserves. Well, how time flies. That’s exactly a year ago.
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