MANILA – An economist of Ayala-led Bank of the Philippine Islands (BPI) said on Thursday banks need to tap the Bangko Sentral ng Pilipinas’ (BSP) rediscounting facility more to have additional funds to lend to their clients.
This came after the BSP’s policy-making Monetary Board (MB) eased key rates, rules on compliance reporting by banks and the calculation of penalties on reserve requirements and single borrowers limits, and cut the term spread of rediscounting loans vis-à-vis the overnight lending rate to zero.
In a research note dated March 19, BPI chief economist Emilio Neri Jr. cited the need for a government stimulus program for sectors affected by the coronavirus disease (Covid-19) global pandemic.
He said for one, the 50 basis points reduction in the central bank’s key policy rates is “the appropriate response on the monetary front.”
The rate cut and the liquidity-boosting measures are targeted to ensure availability of funds amid slower economic activity as an enhanced community quarantine is implemented in Luzon from March 17 until April 12 to curb the spread of Covid-19.
The BSP, in a statement, said the Board noted that “while the enforcement of quarantine measures could help in slowing the spread of the virus, the resulting disruptions to industries and private spending are likely to reduce economic growth in the near term.”
It also said the global pandemic reduced “prospects for the global economy, which could negatively impact tourism and trade, overseas Filipino remittances, and foreign investments.”
It added that there is a need for a “follow-on monetary policy response to address the adverse spillovers associated with the ongoing pandemic.”
With the reduction in interest rates and availability of funds bank, Neri said “most banks may need increased access to the BSP's rediscounting facility. And, in turn, keep credit lines open for their clients.”
He, however, said these measures “have to be complemented by a massive fiscal stimulus that will target key sectors and industries including health, travel, tourism but most especially the families that depend on daily wages.”
The government earlier announced a PHP27.1 billion stimulus package to help sectors affected by the pandemic.
This package include a PHP3.1 billion funding for the acquisition of Covid-19 test kits, among others; a PHP2-billion budget to be used as a subsidy for workers and establishments affected by Covid-19; a PHP1.2-billion unemployment benefit that will be extended by the Social Security System (SSS) for dislocated workers; PHP3 billion for re-skilling and upskilling of workers in sectors affected by the pandemic; PHP14 billion for the tourism sector, which is greatly affected by Covid-19; PHP2.8 billion to be used for loans to be extended to small farmers and fisherfolk affected by calamity and disasters; and PHP1-billion allocation for loans for the micro, small, and medium enterprises. (PNA)
