Creditor PH standby fund in IMF now at $2.26 B

At a glance

  • BSP has a standing IMF commitment of $2.27 billion as creditor-member since 2013.

  • This includes bilateral borrowing agreement, financial transaction plans and new arrangements to borrow.

  • The BSP said its "active engagement sends a strong signal to the international community that the Philippines, despite its own challenges, stands ready to support neighboring countries that need assistance."

The Bangko Sentral ng Pilipinas (BSP) as creditor-member of the International Monetary Fund (IMF) has total commitment of $2.26 billion as of end-2022 in various IMF facilities as standby resources, up from $1.8 billion in 2021.

The Philippines' standby fund was higher because of valuation and exchange rate, not because the BSP raised the amount.

The fund includes a bilateral borrowing agreement (BBA) worth $575 million, which the BSP said will likely be renewed by the end of 2023. The BBA is the central bank’s commitment to provide resources to the IMF to finance arrangements for countries with balance of payments difficulties.

Besides the BBA, the BSP has maintained other arrangements with the IMF including the $784.9 million Financial Transactions Plan (FTP) and the New Arrangements to Borrow (NAB) amounting to $907 million.

"The active engagement of the BSP sends a strong signal to the international community that the Philippines, despite its own challenges, stands ready to support neighboring countries that need assistance. This is also indicative of the nation's sound macroeconomic fundamentals and strong external position," said the BSP in a report released on Wednesday, July 5.

The BSP has maintained a maximum BBA amount in the IMF of 431 million Special Drawing Rights or SDRs equivalent to $575 million. This was higher compared to end-2021’s $431 million due to exchange differences from SDR to US dollar. The IMF’s reserve assets and quotas are in SDRs.

“The BBA is a bilateral-level credit arrangement that serves as the IMF’s third line of defense. The 2020 round of BBAs is effective until end-2023, with a possible one-year renewal,” said the BSP.

Meanwhile, the BSP which on its own right is an IMF member is maintaining a maximum amount of $784.9 million as FTP and has a currency exchange arrangement with Portugal, Ireland, Greece, Moldova and Ukraine.

For the period August 2022 to January this year, the BSP’s Monetary Board has approved an FTP participation of about $517 million.

The FTP is a currency exchange arrangement to facilitate lending operations between the IMF and its members. The use of a member’s currency entails a change in the composition of its international reserves, while the overall level of its reserves remains unchanged.

The NAB, on the other hand, is a credit arrangement used when the IMF needs to supplement its resources for lending purposes. The BSP said the NAB “serves as the second line of defense after quota resources.”

As of end-2022, the BSP is maintaining a floor participation of $907 million under the NAB based on the latest exchange rate. The BSP said its NAB participation has an SDR interest rate of 2.9 percent.

The BSP in the original document detailing the NAB contribution said that transfers under the credit arrangement will not have any impact on the country’s foreign exchange reserves because it will only result to a change in portfolio allocation.

The BSP first participated in the IMF fund sourcing in 2013. It became a creditor-member in 2010 after pre-paying its last IMF loans in 2006.