BSP approves P540-B advancements for NG

The Bangko Sentral ng Pilipinas (BSP) approved the National Government’s request for P540 billion in advances to finance the budget deficit due to the expenses of the COVID-19 pandemic.

BSP Governor Benjamin E. Diokno said that the previous interim loan of P300 billion through a buyback agreement with the Treasury (BTr) has been paid in full.

According to Diokno, the Monetary Board “approved (on Thursday) the National Government’s request for a new tranche of provisional advances in the amount of P540 billion (approximately $ 11.1 billion), in accordance with Section 89 of the Law of the Republic No. 7653 (the “New” Law of the Central Bank “) as amended”.

Diokno also said that BTr “has fully liquidated the previous repository of P300 billion on September 29 (2020)”.

The seven-member Monetary Board chaired by Diokno held two meetings Thursday, one for the scheduled policy-setting meeting and the special review and approval for government funding.

According to central bank statutes, the BSP can advance to the government a maximum of 20 percent of the average income of the national government during the last three years, or from 2017 to 2019. This is equivalent to approximately P564 billion.

The government and BSP negotiated a repurchase agreement in March for the first tranche of P300 billion and this was payable after three months, but can be renewed for another three-month period.

The second law “Bayanihan to recover as one” allowed the National Government to withdraw additional cash advances from the BSP, which will be 10 percent of the average government income for the last three years. This is around P282 billion and has a longer term of one year.

Both the BSP Law and the second Bayanihan Law combined have made it possible for the National Government to have provisional advances in the amount of P846 billion, of which P540 billion have been approved.