The Philippine central bank on Monday (March 23) unveiled a massive stimulus program for the national government’s fight against the COVID-19 pandemic, saying it will lend as much as P300 billion to the Bureau of the Treasury for this purpose.
“Para sa bayan (For the nation),” said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno in a mobile phone message, sharing the text of a statement explaining the Philippine version of “quantitative easing” scheme first used by the US Federal Reserve, the BSP counterpart in the US, in response to the 2008 global financial crisis.
“To further support the Filipino people during the COVID-19 pandemic, the Monetary Board authorized the Bangko Sentral fig Pilipinas to purchase securities from the Bureau of Treasury (BTr) under a repurchase agreement in the amount of P300 billion with a maximum repayment period of 6 months,” the statement said.
“The fund generated from the said agreement shall be used to support the national government’s programs to counter the impact of the coronavirus disease,” it added, explaining the workings of the regulator’s newly restored ability to conduct open market operations.
Under the scheme, the BTr will issue debt securities — whether in the form of short term Treasury bills or longer term Treasury bonds — which the central bank will then buy or invest in.
The money that the BTr received from this transaction will be used to fund the government’s public health spending. Once the debt securities mature, the government will repay the central bank the amount it borrowed, with interest.
The central bank’s open markets operations — where the regulator could inject into or drain cash from the financial system by buying or selling debt securities — was removed when the new law creating the Bangko Sentral ng Pilipinas was enacted in 1993 to replace the bankrupted Central Bank of the Philippines.
Congress restored this power, along with the ability to issue its own debt securities in the most recent amendment of the central bank’s charter, enacted in February 2019.
“This arrangement is the most cost-effective way for us to provide an extra lifeline to the national government to support the programs to fight this pandemic,” National Treasurer Rosalia de Leon said in a statement issued jointly with the central bank.
Diokno said, “We continue to support the government’s initiatives and objectives during the enhanced community quarantine. This additional amount is intended to provide support for those most affected by the [quarantine], especially in Luzon, for the next 60 to 90 days.”
“Rest assured that the BSP, in coordination with the relevant government agencies, will continue to fulfill its mandate with the benefit of the Filipino people in mind,” Diokno added.