The Philippines will utilize the additional $2.78 billion in special drawing rights (SDR) allocation from the International Monetary Fund (IMF) for COVID-19 response and fiscal headroom.
“How it will be used is still being discussed,” said Bangko Sentral ng Pilipinas (BSP) managing director Zeno R. Abenoja of the Department of Economic Research. “Right now, what it has done is actually improve the external position and liquidity of the Philippines,” he added.
The utilization of the fresh inflows from the IMF is currently being worked out by the BSP and other government agencies, such as the Bureau of the Treasury.
While still unused pending the technicalities and accounting procedures of SDRs, some $3.996 billion SDR allocation will be part of the country’s gross international reserves (GIR), for now. The additional SDR was reflected in the August GIR, which raised the US dollar stock to $108 billion. Prior to the fresh SDR, the GIR has an existing SDR component worth $1.223 billion.
BSP Senior Director Redentor Paolo Alegre Jr. said that when the SDR allocation is utilized and converted into US dollars, whatever amount that the government – via the BSP and the Department of Finance -- will appropriate for fiscal space and pandemic response will “contribute to a decline in the GIR.”
Alegre explained that in the BOP speak, the SDR is a liability and its impact on the BOP, which is on the financial account specifically the other investment account, will be reflected as a net increase in liabilities by $2.78 billion.
“If we use the infusion to buy or import, for example vaccines, there will be an increase in imports and if exports remain the same, we can expect that the current account balance will decrease and with that, the BOP position will also decrease,” said Alegre. “This is a liability (in the BOP) and it carries with it interest payments, so this will affect our primary income balance and since we’re paying out, the balance will also decrease which will contribute to a lower BOP,” he added.
The BSP revised its BOP statistics in 2010 which treated the SDR allocation as a transaction. The revised treatment of SDR allocation, upon the recommendation of the IMF, affected both the BOP and the GIR. It also affected the debt stock.
BSP Governor Benjamin E. Diokno said in August that governments are advised to utilize the new SDR allocation for pandemic response. He said the SDRs will be less costly to tap compared to policy or program loans, and it will “reduce the government’s reliance on foreign debt for financing COVID-19 crisis response.”
The country’s outstanding external debt surpassed $100 billion to $101.2 billion as of end-June this year. External debt was up by 15.66 percent year-on-year or by $13.7 billion over the same period in 2020.