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Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) said on October 14, 2021, that the national government did not need additional bridge funding, citing the BSP’s ability to handle pandemic-related financial obligations and an unused option under Bayanihan 2.

In a virtual briefing, Diokno said that the Bayanihan to Recover as One Act has a clause that allows the Department of Finance (DOF) to get bridging funding.

“However, (it) was not used by the Department of Finance,” he said.

According to Diokno, the central bank’s monetary advances to the national government are in accordance with the revised BSP Charter.

The revised BSP Charter allows the central bank to provide temporary loans to the national government based on the latter’s average receipts over the previous three years.

Since the epidemic began last year, the BSP has given the national government PHP300 billion in a short-term repurchase agreement and three PHP540 billion bridging loans.

“And the way I see it, now that we’ve turned the corner, and I’m optimistic about it, the number of cases has been reduced in half, there is now optimism for the economy, and maybe there is no longer a need for the Department of Finance’s PHP540-billion bridging funding.” So, other than the PHP540 (billion) that is presently being made available to the Department of Finance, I don’t see any need for further bridge funding,” Diokno added.

Economists say the central bank is taking the lead in keeping the domestic economy afloat in the midst of the pandemic, thanks to these cash advances and aggressive cuts in the central bank’s key policy rates totaling 200 basis points, bringing the BSP’s overnight reverse repurchase (RRP) rate to a record-low 2 percent.

Diokno, on the other hand, said that the unprecedented magnitude of the shock produced by the coronavirus disease 2019 (Covid-19) necessitated a whole-of-government response to the issue.

“As such, the BSP and the national government’s policy actions are part of the coordinated and complementary policy responses for both monetary and fiscal authorities to restore market confidence, mitigate the impact of the crisis, facilitate economic recovery, and minimize the economy’s long-term scarring effects,” he said.

He said that the BSP’s exceptional liquidity boosting and alleviation actions enabled the ongoing operation of the financial system and minimized the system’s impact from the epidemic.

“However, the monetary authorities’ powers are limited. And, while the BSP has ample monetary space and a wide range of monetary tools and regulatory measures to support the economy, the heavy lifting has come primarily from fiscal authorities as policy interventions, such as pro-poor spending programs, public health measures, and social protection schemes, have become more targeted and directed,” he added.

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