NextGen Day

Benjamin Diokno is aware of the limitations of monetary policy and acknowledges that he will not be able to fix all of the country’s economic difficulties.

Nonetheless, it is clear from the actions of fellow policymakers in government and the private sector that the governor of the Bangko Sentral ng Pilipinas (BSP) has taken on an outsized role in ensuring that the state has the funds it needs to function, that credit continues to flow to the private sector, and that Filipinos in lockdown can pay for essential goods using electronic means.

Diokno spearheaded a proposal to lend the national government almost half a trillion pesos for budgetary support early in the pandemic, followed a few months later by billions more in a similar deal.

The action was first met with skepticism by critics, who saw it as the central bank printing money to fund the government’s budget. Any reservations regarding the program were swiftly dispelled when it became evident that the monies were critical to the state’s pandemic response going well.

Similarly, conservative economists questioned the central bank chief’s ultra-low interest rate strategy, warning that it would worsen the country’s inflation situation. Many people were concerned that the monetary authority was abandoning its historic anti-inflation stance in favor of a more pro-growth attitude.

However, with almost P2.3 trillion in liquidity injected into the banking system since the start of the COVID-19 crisis, critics have calmed down, recognizing that Diokno’s unusual tactics appear to have worked.

Candidate from the outside

When Malacanang announced Diokno’s appointment in March 2019, everyone was taken aback.

Despite his good track record on the fiscal side of government (he was an architect of the ‘build, build, build’ infrastructure program), no one had him on their shortlist of bets to become the country’s next central bank chief.

But, almost three years later, President Duterte’s decision to choose Diokno as governor, which was backed in part by Finance Secretary Carlos Dominguez III, has shown to be a wise one.

The Banker, a London-based worldwide business, banking, and finance journal published by the Financial Times, just named Diokno, 73, the finest central banker in the world.

“I feel my expertise on the budgetary front has aided me much in doing my duties as governor of the central bank,” he says. “As I execute duties relating to the administration of monetary policy, it has given me a comprehensive picture of the economy.”

He is a professor emeritus at the University of the Philippines School of Economics and holds a PhD in economics from Syracuse University in New York. The Banker has named him the best central bank governor in the world, which is a first for the Philippines.

Diokno, who was also awarded the top central banker in Asia-Pacific, was selected the “Global Central Banker of the Year 2022” by The Banker, who chose him from a list of regional winners that included the following central bankers: For the Americas, Governor Julio Velarde of the Central Reserve Bank of Peru; for Europe, Governor Francois Villeroy de Galhau of the Banque de France; for the Middle East, Governor Rasheed M Al-Maraj of the Central Bank of Bahrain; and for Africa, Governor Florens Luoga of the Bank of Tanzania.

The annual awards, according to the journal, honor politicians who “have best managed to encourage growth and stabilize their economy” as the globe continues to grapple with the COVID-19 issue.

The Banker points to the BSP’s achievements during Diokno’s tenure, the most notable of which is the central bank’s flexible monetary policy to aid economic recovery.

“After a 9.6% drop in GDP in 2020, the economy has rebounded in 2021, with a 12-percent increase in the second quarter and a 7.1-percent increase in the third quarter of the previous year,” according to The Banker.

Even as inflationary dangers loomed on the global horizon last year, the BSP kept its policy interest rate at its lowest level. He claims that somewhat higher inflation in the Philippines is due to factors reducing supply rather than an increase in demand. This suggests that administrative actions implemented by the national government, rather than increased interest rates, are the best option.

Out of the box thinking
Simultaneously, the BSP has implemented measures to aid economic recovery, some of which are out of the ordinary for a central bank.

It included bank loans to micro, small, and medium-sized firms in the calculation of financial institutions’ reserve requirements, encouraging increased lending to small businesses.

At the height of the pandemic, it also began buying government assets on the secondary market to help ensure that the financial system’s liquidity remained adequate.

The BSP has also increased efforts to transition the Philippines from a cash-heavy to a cash-lite, digital-heavy society, which is arguably most crucial for the average Filipino.
Before the end of his tenure in 2023, he wants to achieve two goals: first, at least half of all financial transactions in the country will be handled electronically, and second, at least 70% of Filipino adults would have financial accounts.

Faster payment processes, according to Diokno, speed up capital turnaround and, as a result, income growth. Simultaneously, digitization encourages greater financial inclusion by making financial products and services more accessible to a wider range of people.

The Philippines is on pace to accomplish these goals so far. Digital payments already accounted for 20% of total financial transactions in the country by the end of 2020, up from 1% in 2013. From 20.9 million in 2019 to 41 million in the second quarter of 2021, representing 53 percent of the adult population, the number of adult Filipinos with financial accounts had doubled to 41 million, representing 53 percent of the adult population.

“We can unlock revenue and growth potential for the Filipino people through digitalization,” adds Diokno. “In recognition of this, the BSP has enacted financial digitalization-enabling legislation.”

Execution that is bold and quick
Many central bank insiders will point out that Diokno’s reform efforts over the last three years were the product of long-term projects that the institution had been working on for a few years.

Many people were astonished by how quickly he wanted these initiatives to be implemented, bypassing the cautious initial measures that past central bank governors chose for good cause.

“It’s good to be cautious,” says a high-ranking BSP official who requested anonymity. “This is critical, especially in central banking, where even minor mistakes have a huge impact on millions of Filipinos.” But every now and then, it takes an outsider to say, ‘OK, enough studying, let’s put it into practice.'”

That appears to be the narrative of Diokno’s surprise success as governor of the Philippines’ central bank.

He may be correct in believing that a central bank governor cannot solve all of the country’s economic difficulties. He has, however, surprised detractors and even casual spectators by assisting in the resolution of many of them.

And the lives of Filipinos have improved as a result.

Save/Share this story with QR CODE

---

Disclaimer

This article is for informational purposes only and does not constitute endorsement of any specific technologies or methodologies and financial advice or endorsement of any specific products or services.

📩 Need to get in touch?

📩 Feel free to Contact NextGenDay.com for comments, suggestions, reviews, or anything else.

---

We appreciate your reading. 😊Simple Ways To Say Thanks & Support Us:
1.) ❤️GIVE A TIP. Send a small donation thru Paypal😊❤️
Your DONATION will be used to fund and maintain NEXTGENDAY.com
Subscribers in the Philippines can make donations to mobile number 0917 906 3081, thru GCash.
3.) 🛒 BUY or SIGN UP to our AFFILIATE PARTNERS.
4.) 👍 Give this news article a THUMBS UP, and Leave a Comment (at Least Five Words).

---

AFFILIATE PARTNERS

World Class Nutritional Supplements - Buy Highest Quality Products, Purest Most Healthy Ingredients, Direct to your Door! Up to 90% OFF.
Join LiveGood Today - A company created to satisfy the world's most demanding leaders and entrepreneurs, with the best compensation plan today.

---