Duterte gov't to borrow from BSP anew next year if recovery stalls
MANILA, Philippines (UPDATE 1 6:59 a.m. October 15) — The Duterte administration may borrow money from the Bangko Sentral ng Pilipinas (BSP) again next year if the highly anticipated economic rebound from the pandemic does not materialize.
“Our first options are to go back into the commercial market, but if the economy doesn't perform as we expect, we will go back to them (BSP),” Finance Secretary Carlos Dominguez III told Bloomberg on Wednesday.
The central bank has been the government’s go-to-lender this year as a scramble to raise funding for recovery programs prompted the finance department to tap all possible fund sources. Under the central bank charter, BSP can lend government up to 20% of the state’s average revenue, equivalent to P540 billion.
That limit was even raised to 30% under Republic Act 11494 or the Bayanihan to Recover As One, which means the central bank may now extend up to P850 billion in financing if the government needs it.
So far however, only the original limit has been exhausted when BSP approved advances to that amount this month, payable until December 29. Dominguez said government is unlikely to ask for more, at least for now. “At the moment we don't need to do that but that is in our reserves,” he said in the same interview.
“We’re keeping the balance of the credit line from the central bank in reserve,” he also said.
For the BSP however, the likelihood of loaning government money beyond the year may fan concerns the central bank is losing its credibility and independence. BSP Governor Benjamin Diokno had earlier downplayed these insinuations, saying the current crisis necessitates a whole-of-government approach.
Government revenues are projected to grow 7.8% annually next year, a forecast hinge on a rebound of gross domestic product by 6.5-7.5% year-on-year. Even at that level though, revenues would hardly recover half of potential losses of as much as 19.7% in 2020 when the economy could contract by up to 6.6% on average.
That said, Dominguez reiterated government will not be selling state assets or introduce new taxes to raise funding.
Prior to P540 billion, the central bank last March purchased P300 billion worth of 3-month Treasury bonds to infuse the government money. The securities matured and was fully settled last September 29.
Editor's note: This article has been amended to clarify that Secretary Dominguez said not to sell assets or introduce new taxes, in contrast to the earlier version.
- Latest
- Trending
