The Duterte administration has requested for a fresh provisional advance from the Bangko Sentral ng Pilipinas (BSP) in the amount of P540 billion.
“The NG has requested for fresh provisional advance of P540 billion to be settled on or before December 29 (2020) at zero interest,” according to BSP Governor Benjamin E. Diokno.
According to Diokno, the Monetary Board is set to review the government’s request for a fresh provisional advance. He also said that the proposed advances will be used as budget support, that it is for “deficit financing as a result of the coronavirus pandemic.”
For the month of August, the government reported a budget deficit of P40.1 billion. Year-to-date, the deficit has ballooned to P740.7 billion.
Based on the BSP Charter, it is allowed to enter into repurchase or repo arrangements with the government. Under its law, the BSP can advance to the government a max of 20 percent of the National Government average income for the last three years, or 2017 to 2019.
This advance is short term or only three months but renewable for another three months. Under this option, the government can take out about as much as P564 billion, of which P300 billion has been tapped back in March to finance its anti-pandemic programs. The BSP purchased government securities from the Bureau of Treasury under a repo agreement.
The National Government under the second “Bayanihan To Recover As One” Act has another window to request for a new provisional advance from the BSP which will be 10 percent of the average income of the government for the last three years. The estimated amount for this provisional advance is about P282 billion and it will have a longer term of one year.
Under the Bayanihan 2, the National Government has two years to avail of the additional provisional advance before this option lapses.
It is not yet known if the government is entering another repo deal with the BSP to avail of the P540 billion funding, or if it will be done in another transaction.