By LEE C. CHIPONGIAN
The absolute limit of emergency advances that the Bangko Sentral ng Pilipinas (BSP) can extend to the National Government (NG) is about ₱560 billion at no interest, based on guidelines for direct provisional loans under the BSP charter.
This means the maximum additional advances that the BSP can loan to NG is ₱200 billion to ₱260 billion because the first ₱300 billion emergency financing – structured as repurchase agreement where the BSP will buy government securities from the Bureau of the Treasury – has already been transacted last March.
The provision of the law is crystal clear,” according to BSP Governor Benjamin E. Diokno. “The BSP’s direct provisional advances to the NG should not, in their aggregate, exceed 20 percent of the NG’s average annual income for the last three preceding fiscal years. The average is approximately ₱500 billion.”
“In any event, the BSP has been supportive of the NG’s ef¬forts through other means,” said Diokno.
The lockdown and containment of the whole of Luzon and other regions will cost the NG ₱305.22 billion as emergency support to vulnerable groups and resources to beat the virus outbreak of about ₱35.72 billion.
Diokno said they are limited to granting direct provisional advances to NG of up to 20 percent of the average annual income of the borrower – in this case the government – for the last three years.
The government’s average revenue in 2017 to 2019 was around ₱2.8 trillion, and 20 percent of this amount is ₱560 billion.
The independent and autonomous BSP has responded quickly to the financing requirement of the NG to fight against COVID-19. It purchased government securities in the amount of ₱300 billion to be repaid in three to six months, and also remitted ₱20 billion as dividends when it was no longer required to pay dividends to the NG.
In addition, the BSP infused more liquidity into the economy when it cut both the overnight key rate and banks’ reserve requirement ratio (RRR). The RRR cut released about ₱225 billion of fresh funds for banks’ use.