The national government has paid in full its P300 billion loan with the Bangko Sentral ng Pilipinas (BSP), well ahead of the maturity date next month, the Department of Finance (DOF) announced.
In a statement, Friday, May 20, Finance Secretary Carlos G. Dominguez III said the repayment of the P300-billion outstanding provisional advances with the central bank fulfilled the goal of unwinding the pandemic-related liquidity support from the BSP before the start of the next administration, Dominguez said. The actual repayment was also well in advance of the June 11, 2022 maturity date.
The provisional advances is a temporary measure under Section 89 of Republic Act (RA) No. 7653 or The New Central Bank Act that allows the BSP to extend short-term financing to the NG in the amount of up to 20 percent of the latter’s average annual income in the past three years.
The grant of provisional advances had enabled the government steady access to cash for the uninterrupted delivery of large fiscal response and recovery measures during the pandemic despite the lower revenue collections and disruptions to financial markets experienced throughout the last two years.
With the sustained economic recovery and consequent strengthening of revenue collections last year, the volume of the provisional advances was downsized from P540 billion in 2021 to P300 billion in January this year, which is only half of the maximum available amount of P600 billion.
The early repayment was made possible by the sooner than expected return of the economy to its pre-pandemic strength, the DOF said.
Real gross domestic product (GDP) grew faster than expected in the first quarter of the year at 8.3 percent, helping the government attain revenue collections growth of 12.6 percent over the same period.
With the strong revenue performance, the budget deficit only reached P317 billion, leaving the government at a strong cash position.
“The advance payment of the national government’s P300-billion provincial advances from the BSP underscores the continued strong fiscal position of the Duterte administration despite the financial challenges from the pandemic and, later, the Russia-Ukraine conflict,” Dominguez said.
“Its solid macroeconomic fundamentals—made even stronger by the game-changing reforms carried out by President Duterte during the COVID-19 crisis to further liberalize the economy and attract investors—will return the Philippines soon enough to its pre-pandemic path of rapid and inclusive growth,” he added.
Moreover, the government was already able to raise 35 percent of its full-year financing requirement of P2.212 trillion at the end of March.
The government was able to raise P233 billion from loans and bonds in the external market and P549 billion through the issuance of government securities in the domestic market, despite the challenging financing conditions related to the normalization of global interest rates.