The Bangko Sentral ng Pilipinas (BSP) has extended a fresh P540-billion zero-interest loan to the government for use as budgetary support, its chief announced on Wednesday.
During the Kapihan sa Manila Bay forum, BSP Governor Benjamin Diokno said the loan came after the central bank’s policymaking Monetary Board approved the government’s request for it on December 28.
The loan would provide the government an immediate cash source to sustain its coronavirus disease 2019 (Covid-19) pandemic response amid lower revenues collected.
These revenues eased by 9.56 percent as expenditures grew by 11.59 percent in the first 11 months of 2020. This resulted in the budget deficit expanding to P1.06 trillion.
According to Diokno, the loan was mandated under Republic Act 7653, or the “New Central Bank Act.” The government must pay it back first before requesting a new one, he said.
He also said the government had settled its previous P540-billion borrowings from the Bangko Sentral.
In March, the central bank bought P300 billion worth of government securities (GS) to support state programs aimed at countering the pandemic’s impact.
The purchase was allowed under a repurchase agreement signed by the central bank and the Bureau of the Treasury, with a maximum repayment period of six months. The infusion was equivalent to 1.6 percent of the country’s gross domestic product.
Besides these, Diokno also said the BSP also remitted P40.5 billion in dividends to the government, calling it its “contribution” to the state.
“That is about 30 percent of total dividends by [government-run] corporations,” he added.
The central bank chief also said the Bangko Sentral had also bought government securities in the secondary market as part of its immediate monetary policy response to help shore up domestic liquidity, and restore market players’ confidence to continue joining auctions of these securities.
“These measures have helped address temporary volatilities in the GS market, by maintaining market interests to continue to hold GS, which in turn assisted the NG in meeting its funding requirements for its Covid-19- related programs,” he said.