The Philippine government is set to borrow an additional 540 billion pesos from the Bangko Sentral ng Pilipinas (BSP) which will be used for budget support as the country faces a budget deficit due to the COVID-19 pandemic .
In a virtual briefing Thursday, BSP Governor Benjamin Diokno said the Monetary Board approved the borrowing program last week.
“We recently gave them, extended our agreement with them, 540 billion pesos. We have just renewed aid to the government, ”he told reporters during the GBED talks.
As a reminder, BSP previously approved two loans worth 540 billion pesos each to the national government – one in December 2020 and another in October of last year.
The central bank also loaned some 300 billion pesos to the government in the form of securities in March 2020.
“They paid the 540 billion pesos, now they are asking for a renewal and we did it, the Monetary Board approved it last week,” Diokno said.
According to Diokno, the central bank’s liquidity easing measures have so far injected about 2.16 trillion pesos into the country’s financial system as of July 1, 2021. This is equivalent to 12.14 percent of the country’s annual nominal GDP. countries for 2020.
“As we monitor developments on the global front, the Philippines is still in a favorable position to withstand adverse shocks that may emanate from abroad, including the potential effects of the unexpected tightening of US monetary policy,” a- he declared.
“We will be able to cope with the tightening global financial conditions, given a manageable fiscal position, a stable credit rating and a strong external payments position,” he added.
The country’s revised gross international reserves (GIR) stood at $ 107.25 billion at the end of May, or 7.9 times the country’s short-term external debt on the basis of original maturity and 5.2 times on the basis of the residual maturity.
Earlier this week, Fitch Ratings downgraded its credit rating outlook on the Philippines from “negative” to “stable,” citing the economic fallout from the pandemic.
Fitch said the downgrade “reflects the growing risks to the credit profile of the impact of the pandemic and its consequences on policy making as well as on economic and fiscal outcomes.”
For his part, Diokno said the country’s monetary policy should remain favorable until the recovery is “firmly underway”.
“The timing and conditions under which the BSP will begin to unwind monetary stimulus will continue to be guided by the medium-term domestic inflation and growth prospects and the risks surrounding those prospects, as well as by a wide range of economic and financial factors. indicators, ”he said.
Last month, the BSP raised its inflation outlook for 2021 to 4.0% from its previous projection of 3.9%, mainly due to rising global crude oil prices.
Several transport players have called for controls on fuel prices given the continued increase, but Diokno said this was not feasible.
“Controlling fuel prices is out of the question,” he said, “we have had this experience in the past and it is not sound both politically and economically”. – RSJ, GMA News