BSP Governor Benjamin Diokno
MANILA – The Bangko Sentral ng Pilipinas’ (BSP) provisional advances to the national government (NG) are temporary and are extended to help the government finance pandemic-related expenses.
“The provisional advances of the BSP to the national government are a time-bound measure to complement the NG’s broad-based health and fiscal programs in mitigating the impact of the Covid-19,” BSP Governor Benjamin Diokno during a virtual briefing Thursday, citing the national government has no unpaid obligations to the central bank as of end-2020.
In March last year, the central bank entered a short-term repurchase deal with the NG, wherein the former purchased PHP300 billion worth of government securities (GS) to augment the government’s cash position and immediately finance coronavirus disease 2019 (Covid-19) programs.
The securities involved in the deal have a three-month tenor but can be extended by another three months.
The Bureau of the Treasury (BTr) redeemed the GS on Sept. 27, 2020.
The BSP also extended a PHP540-billion provisional advance to the NG last October and this was repaid on Dec.18, 2020.
“Thus, at the end of last year, the national government has no outstanding loan obligations (to the BSP),” Diokno added.
The central bank’s Charter authorizes the BSP to extend such cash advance to the national government provided that the amount is equivalent to 30 percent of the government’s average income in the past three years.
Last Dec. 28, BSP’s policy-making Monetary Board (MB) approved another PHP540-billion provisional advance to the NG, which Diokno said is expected to be drawn out within this month.
The Bayanihan to Recover as One Act allows for the national government to tap additional funding from the central bank, equivalent to 10 percent of the NG’s average income in the last three years. This amounts to around PHP280 billion.
Diokno said the additional bridge financing has a one-year tenor and is renewable for another year upon the approval of the MB.
“But that has to be accessed within the next two years. It’s really focused on Covid-19,” he said, adding “at the moment, there’s no such request.”
Diokno maintained that “the BSP’s measures to support the NG’s financial requirements do not constitute a long-term source of funding for government spending.”
“These measures are not expected to resolve the permanent increase in the monetary base or in significant inflationary pressures, and, as such, are not expected to affect the conduct of monetary policy,” he added. (PNA)
