BSP renews P300-B loan to NG for 3 more months


By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has renewed for another three months its P300 billion, zero-rate, provisional advances to the National Government (NG) as part of COVID-19 emergency response.

BSP Governor Benjamin E. Diokno. (Bloomberg file Photo) BSP Governor Benjamin E. Diokno. (Bloomberg file Photo)

BSP Governor Benjamin E. Diokno said the Monetary Board has approved to extend the repurchase agreement or repo with the Bureau of the Treasury (BTr) that it entered into in March, for the government’s temporary and emergency funding of its anti-pandemic programs.

Based on the central bank charter, direct provisional advances to the NG will not exceed 20 percent of the NG’s average annual income for the last three preceding fiscal years which according to numbers, is P540 billion.

The BSP could provide another P240 billion to the NG by buying government securities from the BTr.

“(The) Monetary Board just approved the extension of the P300 billion repo agreement (with BTr), that’s good for another three months. Whether they will need more than P300 billion we have not received any such request from the executive department yet,” Diokno said in his latest “GBED Talks” with the press.

The BSP provisional loan to NG is only extendable up to six months. The first repo deal was in March and the renewal prolongs the agreement until September.

Diokno explained earlier that 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 P2.8 trillion, and 20 percent of this amount is around P540 billion.

The BSP’s first actions -- as a response to the health crisis -- were to implement liquidity-enhancing measures to boost market confidence. The BSP said its liquidity support is now over P1.2 trillion or 6.4 percent of gross domestic product.

The BSP has been buying government securities such as Treasury Bills and Treasury Bonds for NG to have the funds to fight the pandemic.

“As the country carefully transitions into the ‘New Economy’ the BSP reaffirms its role in complementing the NG’s broader efforts to mitigate the adverse impact of the health crisis and facilitate the quick recovery of the economy. This is in line with the BSP’s mandate to preserve price and financial stability conducive to the balanced and sustainable economic growth,” said Diokno.

To keep liquidity and credit flowing to households and businesses even on lockdown measures, the BSP has deployed a “wide range of monetary instruments and extraordinary liquidity measures” such as: the reduction in the overnight policy interest rate of a cumulative 125 basis points (bps); cutting banks’ reserve requirements ratio by 200 bps alongside additional modes of compliance to encourage bank lending to MSMEs affected by the pandemic; and purchases of government securities from domestic banks in the secondary market.