BSP wants to issue own bonds

The Bangko Sentral ng Pilipinas has reiterated its call to be allowed to issue its own bonds, saying it needs a wider array of tools for managing the amount of money circulating in the economy.

BSP Deputy Governor Nestor Espenilla Jr. said there must be another instrument—bonds issued by the central bank itself—to buy and sell, aside from government securities, for its open market operations.

“The need for the BSP to have its own bonds would become more pressing in the event the government posts a (budget) surplus,” he said in a chance interview.

When the government finally posts a budget surplus or when the deficit goes down substantially, there might be insufficient amount of securities that the BSP can use for its open market operations, Espenilla said.

At present, the BSP buys and sells government securities as a liquidity management tool. It buys securities when it intends to inject more liquidity into the economy to help boost consumption, and thus boost growth. On the other hand, it sells securities if there is excessive money in the economy that is causing increases in demand and in the prices of goods and services beyond comfortable levels.

The amount of government securities available, however, depends on the state’s budget position. On one hand, it issues more securities if it has a bigger budget deficit to ensure it covers the state’s expenditure requirements. On the other hand, it issues fewer securities if the deficit is smaller.

Earlier, Representative Sergio Apostol, chairman of the House committee on banks and financial intermediaries, said the Lower House had already completed a draft bill amending the charter of the BSP. The draft, however, does not contain a provision on the BSP’s proposal to issue its own bonds.