The government prepays the P540-B BSP debt

Finance Secretary Carlos Dominguez III has informed the Monetary Council (MB) that the National Government (NG) will reimburse the full amount of its overdue provisional advances of 540 billion pesos to the Bangko Sentral ng Pilipinas (BSP) this week, before January 12. , due date 2022, in addition to reducing its demand for liquidity support to 300 billion pesos next year amid improving economic prospects.

Dominguez, in a letter to BSP Governor Benjamin Diokno, said the lower 300 billion pesos to be requested by the government as an interim advance in the second week of January 2022 signals to the market “that we are on track with liquidity unwinding. support on stronger evidence of a return to economic strength.

As the head of President Rodrigo Duterte’s economic team, Dominguez revealed this NG plan, praising the “strong monetary and fiscal coordination between the BSP and the Ministry of Finance to ensure the Philippines remains resilient in this crisis.”

The extension of interim advances is a temporary arrangement between the BSP and the NG to provide the government with access to ample cash resources while income generation is weakened and the execution of the borrowing program is postponed. involved by the scale of the borrowing requirement and the unpredictability of financial markets. in the midst of the pandemic.

Under Article 89 of the New Central Bank Law (Republic Law No. 7653), the BSP may make direct provisional advances with or without interest to the NG to finance the authorized expenditure in its annual allocation, to provided that the said advances are repaid before the expiration of a period of three months, extendable by three additional months, to the extent that the CA can allow it following the date on which the NG received these provisional advances.

Initially, the advances were in the form of a zero-rate repo transaction in the amount of 300 billion pesos, granted in March 2020 and fully repaid in September 2020.

The interim advances were then converted into a three-month interest-free loan in the amount of 540 billion pesos, granted in October 2020 and fully repaid in December 2020.

These were consulted again in January 2021, extended in April 2021 and fully reimbursed in July 2021.

The last access to interim advances was in July 2021, which was due in October 2021 and extended until January 2022, but will be fully repaid in December 2021.

National Treasurer Rosalia de Leon had recommended early repayment of interim advances of 540 billion pesos, which will be settled on December 10, based on a favorable cash flow situation resulting from promising revenue collection and support overwhelming in the recent Retail Treasury Bond (RTB) offer.

“We have already seen the economic recovery start to take hold as more companies embark on a safe reopening with the successful deployment of the government’s mass immunization program,” Dominguez said in his letter to Diokno dated December 1.

“The extension of a new interim advance of 300 billion pesos will provide the government with sufficient resources to safeguard this promising but still fragile recovery,” he added.

The new interim advances that will be requested in January will have terms similar to the previous loan – zero interest and a three-month maturity with another three-month extension, as recommended by de Leon.

De Leon also recommended that the 300 billion peso advances be repaid in full by the end of June 2022 in order to fully unwind the cash support before the next administration begins.

The funds provided under this short-term loan arrangement are not used for direct financing of government operations, but serve as a measure of the liquidity gap that ensures that the government will be able to incur significant expenditures before the collection of anticipated receipts or regular loans.

Provisional advances, taken as a whole, must not exceed 20 percent of the borrower’s average annual income over the past three fiscal years, the law specifies.

De Leon said the NG has already accessed the four-cycle facility at volumes that are consistently below the maximum loanable amount of 564 billion pesos in 2020 and 589 billion pesos in 2021. * PNA

About Alexander Estrada

Check Also

Time to Listen to Farmers, Ministry of Agriculture

AT the final Ongpin (Disclosure: An Ateneo School of Government Annual Lecture in memory of …