THE PHILIPPINE government will be asking the central bank for P300 billion in liquidity support next year, less than the previous loan after the country’s economic outlook improved, the Finance chief said.
In a letter to the Bangko Sentral ng Pilipinas (BSP), Finance Secretary Carlos G. Dominguez III said the government would make the request as a provisional advance in the second week of January.
Compared with the previous P540-billion debt, he said the reduced amount signals “that we are on track with the unwinding of liquidity support on firmer evidence of a return to economic strength.”
The Department of Finance (DoF) in a press release on Wednesday said it plans to repay the outstanding P540 billion this week, ahead of the Jan. 12 maturity date.
“The extension of provisional advances is a temporary arrangement between the BSP and the National Government to provide the government access to ample cash resources while revenue generation is weakened,” the DoF said.
Provisional advances are also done while the borrowing program faces a larger need and unpredictable financial markets, it added.
Republic Act No. 7653 or The New Central Bank Act allows the BSP to make direct provisional advances with or without interest to the National Government. These must usually be repaid in three months, but can be extended for another three.
An initial advance in the form of a P300-billion zero-interest repurchase agreement was granted in March last year and repaid by September 2020.
“The provisional advances were then converted to a zero-interest three-month loan in the amount of P540 billion, granted in October 2020 and fully repaid in December 2020,” the DoF said. “These were again accessed in January 2021, extended in April 2021, and fully repaid in July 2021.”
The most recent provisional advance in July will be repaid this week.
The new advances to be requested in January will have zero interest, along with the three-month maturity with another three-month extension.
“We have seen economic recovery already begin to take root as more businesses embark on a safe reopening with the successful rollout of the government’s mass vaccination program,” Mr. Dominguez said in his letter.
“The extension of a new P300-billion provisional advance will ensure sufficient resources for the government to safeguard this promising but still fragile recovery.”
National Treasurer Rosalia V. de Leon said the P300 billion should be fully repaid by the end of June to fully unwind liquidity support before the next administration takes office.
“Funds granted under this short-term lending arrangement are not used for direct financing of government operations but serve as a liquidity gap measure that ensures the government will be able to undertake large spending in advance of anticipated revenue collections or regular borrowing proceeds,” the DoF said. — Jenina P. Ibanez