BSP liquidity infusion surpasses P2T


The level of liquidity injected by the Bangko Sentral ng Pilipinas (BSP) to support the country’s economy has climbed to roughly 12.1 percent of the country’s gross domestic product (GDP).


The central bank’s “policy and liquidity-easing measures has injected into the financial system about P2.2 trillion in liquidity as of June, 2021. This is equivalent to about 12.1 percent of the country’s full-year nominal GDP for 2020,” Diokno was quoted as saying during a virtual briefing on Thursday.


The measures include the cumulative 200-basis-point (bp) cut in the BSP’s key policy rates; the P300 billion and P540 billion in provisional advances to the government; purchases of government securities in the secondary market; cut in the reserve requirement ratios by 200 bps for

universal and commercial banks and non-bank financial institutions with quasi-banking licenses, as well as by 100 bps for thrift banks and rural/cooperative banks; alternative compliance with reserve requirements; and its dividend remittance to the government.


As a result of these monetary moves, the Bangko Sentral has seen a fall in domestic market interest rates, according to Diokno.


“For example, in the primary government securities market, Treasury bill rates have declined by more than 200 basis points across tenors as of May 31 relative to the corresponding rates seen at the end of March 2020, or around the time that the BSP began reducing its policy interest rate,” he said.


High oversubscriptions in government securities main auctions, as well as the Bangko Sentral’s term deposit and reverse repurchase facility auctions, indicate that market confidence is improving.


This allowed the central bank to gradually recalibrate and normalize its monetary operations, according to the BSP chief.


The capital markets’ ability to support firms during the coronavirus disease 2019 pandemic has also been supported by the availability of liquidity and the low interest rate environment.


“In recent months, firms have increasingly tapped the equities and bond markets in order to sustain their businesses amid the crisis,” Diokno said.


Non-financial companies raised nearly 700 percent more equity capital from January to May 2020 than they did the previous year. Capital-raising activity soared by more than 150 percent year over year during the same period this year.


Similarly, despite a reduction in bond issuance by financial firms, non-financial corporate bond issuance increased by more than 80 percent year-over-year in January to May 2021.


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