Central bank extends P540-billion loan to government

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The Bangko Sentral ng Pilipinas (BSP) extended anew a P540-billion loan to the national government last December to help boost its cash flow amid the coronavirus disease 2019 (Covid-19) pandemic.

In an online briefing on Wednesday, BSP Governor Benjamin Diokno said the central bank’s policy-making Monetary Board (MB) approved last December 28 the fresh cash boost, which he termed as bridge financing, to help fund the government’s expenses to deal with the effects of the Covid-19 pandemic.

“The national government needs it,” he said, citing its requirement to provide subsidies to affected individuals and sectors, ensure medical facilities are put in place, and make available funding to procure Covid-19 vaccines.

Diokno said there is also a need to boost the government’s fiscal health since revenues are also affected by the pandemic.

“In the meantime that they do not have the access and the cash to pay for Covid-related programs, then we lent them P540 billion. That is allowed under the law,” he said, citing the loand  is non-interest bearing.

This is the second time the central bank extended a P540-billion provisional advance to the national government.

The first one was approved by the MB in October last year.

Under the BSP’s Charter, the central bank is authorized to extend cash advances to the national government but this should be equivalent to the latter’s average revenues in the last three years, which currently amounts to P540 billion.

In terms of liquidity boost, the latest cash advance is the third for 2020 after the P300-billion repurchase deal between the BSP and the national government last March.

Under the deal, the BSP will purchase P300 billion worth of government securities, which the Bureau of the Treasury (BTr) can redeem within three months.

The repayment period was allowed for extension for another three months. The BTr fully redeemed the debt papers last September. CURRENTPH

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