BSP commits P300B stimulus support
Published Mar 23, 2020 12:00 am
By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) will buy P300 billion worth of short-term government bonds to help in the fight against the spread of COVID-19 in the country and ensure the economy remains afloat.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
BSP Governor Benjamin E. Diokno said the central bank via this stimulus program can provide support to government projects. The additional amount is intended to provide support for those most affected by the ECQ, especially in Luzon, for the next 60-90 days, he said.
“We continue to support the government’s initiatives and objectives during the enhanced community quarantine (ECQ),” according to Diokno.
The BSP’s Monetary Board has authorized central bank officials to buy Bureau of the Treasury (BTr) government securities under a repurchase agreement with a maximum repayment period of six months.
The BSP said that the “fund generated from the said agreement shall be used to support the National Government’s programs to counter the impact of Coronavirus Disease 2019 (COVID-19).”
National Treasurer Rosalia V. de Leon, for her part, said the BSP’s repurchase agreement is “the most cost-effective way for us to provide an extra lifeline to the national government to support the programs to fight this pandemic.”
ING Bank economist Nicholas Mapa said the stimulus support will not only flush the financial market with additional liquidity but will also “keep a lid on interest rates in the process.”
“BSP will purchase securities of up to the six-month tenor after slashing policy rates by 75 basis points (bps) year-to-date and lowering rates on its rediscounting window,” Mapa noted.
“(The) BSP has done much of the heavy lifting in terms of stimulus efforts to combat the economy fallout from COVID-19 and after all these moves they continue to have ample monetary space with the policy rate at 3.25 percent and reserve requirements at 14 percent.”
Mapa said this move is consistent with the BSP’s commitment to ensure there is sufficient liquidity in the financial market.
On March 19, the Monetary Board also slashed the key rate by 50 bps. The BSP earlier decided to temporarily suspend its weekly term deposit facility and to reduce the term spread on its peso rediscounting loans relative to the BSP’s overnight lending rate to zero, effectively freezing the rate at 3.75 percent, regardless of rediscounting maturity.
“We expect BSP to remain open to further easing via further rate cuts and possible reductions to the reserve requirements to keep businesses and individuals afloat during the ongoing COVID-19 episode,” said Mapa.
In the meantime, he said the BSP’s repurchase agreement with the BTr may be used to help fund the planned fiscal rescue package that “hopefully covers income replacement, tax forbearance and liquidity/loan support.
The government has already approved a P27 billion stimulus package at the onset of the enforced lockdown on Luzon last week as economic relief to all Filipinos affected by the ECQ.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
BSP Governor Benjamin E. Diokno said the central bank via this stimulus program can provide support to government projects. The additional amount is intended to provide support for those most affected by the ECQ, especially in Luzon, for the next 60-90 days, he said.
“We continue to support the government’s initiatives and objectives during the enhanced community quarantine (ECQ),” according to Diokno.
The BSP’s Monetary Board has authorized central bank officials to buy Bureau of the Treasury (BTr) government securities under a repurchase agreement with a maximum repayment period of six months.
The BSP said that the “fund generated from the said agreement shall be used to support the National Government’s programs to counter the impact of Coronavirus Disease 2019 (COVID-19).”
National Treasurer Rosalia V. de Leon, for her part, said the BSP’s repurchase agreement is “the most cost-effective way for us to provide an extra lifeline to the national government to support the programs to fight this pandemic.”
ING Bank economist Nicholas Mapa said the stimulus support will not only flush the financial market with additional liquidity but will also “keep a lid on interest rates in the process.”
“BSP will purchase securities of up to the six-month tenor after slashing policy rates by 75 basis points (bps) year-to-date and lowering rates on its rediscounting window,” Mapa noted.
“(The) BSP has done much of the heavy lifting in terms of stimulus efforts to combat the economy fallout from COVID-19 and after all these moves they continue to have ample monetary space with the policy rate at 3.25 percent and reserve requirements at 14 percent.”
Mapa said this move is consistent with the BSP’s commitment to ensure there is sufficient liquidity in the financial market.
On March 19, the Monetary Board also slashed the key rate by 50 bps. The BSP earlier decided to temporarily suspend its weekly term deposit facility and to reduce the term spread on its peso rediscounting loans relative to the BSP’s overnight lending rate to zero, effectively freezing the rate at 3.75 percent, regardless of rediscounting maturity.
“We expect BSP to remain open to further easing via further rate cuts and possible reductions to the reserve requirements to keep businesses and individuals afloat during the ongoing COVID-19 episode,” said Mapa.
In the meantime, he said the BSP’s repurchase agreement with the BTr may be used to help fund the planned fiscal rescue package that “hopefully covers income replacement, tax forbearance and liquidity/loan support.
The government has already approved a P27 billion stimulus package at the onset of the enforced lockdown on Luzon last week as economic relief to all Filipinos affected by the ECQ.