With foreign-exchange reserves exceeding prescribed levels of adequacy, the Philippines extended nearly $350 million in loans to the International Monetary Fund for relending to crisis-stricken countries in the euro zone, including Portugal, Ireland and Greece, according to the Bangko Sentral ng Pilipinas.
The BSP said that due to globalization, the crisis in the West has a potential to spill over to Asia and the Philippines. As such, it said that contributing to global efforts to help stem the problem in the euro zone was a prudent act.
“The BSP signaled its support to the IMF’s efforts in raising resources to strengthen the European firewalls, help stem potential contagion and secure global and economic stability,” the central bank said in a report.
Being a member of the IMF, the Philippines contributes to the organization’s pool of financial resources, which are tapped to help countries dealing with foreign exchange-liquidity problems.
Countries in need of funds can borrow from the IMF, particularly through its Financial Transactions Plan (FTP) and the New Arrangements to Borrow (NAB) facilities.
According to the BSP, out of the total loans extended by the IMF under the FTP, $286.4 million were contributions from the Philippines. Out of the total loans extended by the organization under the NAB, $62 million were also from the Philippines.
“More than half of the funds [from the Philippines] were disbursed to European countries such as Portugal, Ireland and Greece in an effort to address the financial crisis impacting the European economic zone,” the BSP said.
On top of the funds from the Philippines that the IMF already disbursed in 2012, the country has likewise pledged an additional $1 billion to the international lender to further beef up its resources to help resolve the euro-zone crisis. The IMF will draw on the amount should the need arises.
Contributions from the Philippines form part of the hundreds of billions of dollars being earmarked by the IMF and other international creditors to the euro zone, which struggles with a crisis in the financial sector and unmanageable government debts.
The crisis in the Western region is blamed for dragging overall global demand, which has dampened export revenues of emerging economies, including the Philippines.
Meantime, the Philippines has enjoyed growing foreign exchange reserves, which now stand at $84 billion. The buildup of the reserves was credited largely to remittances from overseas Filipinos, foreign investments in the business process outsourcing (BPO) sector and foreign portfolio investments.