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Manila Bulletin devider Business devider BSP has injected P1.9-T liquidity to help gov't, financial market

BSP has injected P1.9-T liquidity to help gov't, financial market

Published Oct 9, 2020 02:00 pm

Bangko Sentral ng  Pilipinas (BSP) Governor Benjamin E. Diokno said Friday that so far, with a fresh P540 -billion loan to the government this week, the total amount of BSP-infused liquidity to help a pandemic-hit financial system has reahed P1.9 trillion ($39.2 billion).

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno ( Bloomberg )

BSP liquidity measures are about 9.6 percent of the gross domestic product (GDP), more than the 3.8 percent to GDP fiscal stimulus provided by the government.

 “The BSP has injected approximately P1.9 trillion ($39.2 billion) in liquidity into the financial system. This is equivalent to 9.6 percent of GDP,” Diokno said. “The amount includes the new provisional advance of P540 billion which is targeted to be released first week of October.”

Diokno said the BSP will continue to support the government’s fight against COVID-19. “BSP is working hand-in-hand with the National Government to ensure that the coronavirus pandemic will leave little permanent scar on the Philippine economy and its people,” he said.

To infuse fresh liquidity for banks and the financial market, the BSP reduced both the overnight policy rate by 1.75 percent and the reserve requirement ratio (RRR) by two percent. The RRR alone released about P250-260 billion into the financial system. The BSP also engaged in debt monetization of P300 billion first tranche in March, and then again with P540 billion this month. The P300 billion has been fully paid in September as per the law that allowed it. The central bank also remitted dividends and purchased government securities in the secondary market.

On October 1, Diokno announced that the Monetary Board which he chairs,  approved the government’s request for a P540 billion advances. This will be used to finance the budget deficit which ballooned due to COVID-19 expenses.

The previous P300 billion provisional loan via a repurchase agreement with the Bureau of the Treasury (BTr) has been fully paid on September 29, he said.

The BSP Charter or Republic Act No. 7653 (the “New Central Bank” Act) as amended by Republic Act No. 11211, allows the central bank to advance to the government a max of 20 percent of the government’s average income for the last three years, or 2017 to 2019. This amounts to about P564 billion.

The second “Bayanihan To Recover As One” Act again permitted the government to avail of additional cash advances from the BSP which will be 10 percent of the average income of the government for the last three years. This is about P282 billion and has a longer term of one year. The government is given two years from the signing of the Bayanihan Act to avail of this loan.

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