BSP gears up for PH credit upgrade with P30B fund

MANILA, Philippines—The Bangko Sentral ng Pilipinas will pursue P30 billion in additional capitalization that Malacañang has yet to provide, in an effort to prepare the regulator for an anticipated investment-grade credit rating scenario.

In a speech during the Ejap (Economic Journalists Association of the Philippines) Awards night last Oct. 19, BSP Deputy Governor Diwa C. Guinigundo said this would be one of the steps that the central bank would take to gear up for a credit upgrade.

The central bank has a total authorized capitalization of P50 billion, which will come from the national treasury.

Malacañang has provided P10 billion in equity in 1996 and another P10 billion last year.

The most optimistic among analysts expect the Philippines’ long-term international borrowings to be rated investment grade as early as 2013. But credit watchdog Standard & Poors Ratings Services said this could happen in two and a half years, more or less.

According to Guinigundo, the Philippines is at the cusp of attaining a much-coveted investment-grade credit rating and, to prepare for that, the BSP will coordinate with other bodies to rationalize the mix of the government’s future borrowing programs between local and external sources to reduce the cost of macroeconomic stabilization.

“With an eye to long-term economic stability, we will pursue amendments to the BSP charter and other relevant laws to beef up [the regulator’s] ability to operate in the new environment,” Guinigundo said. “It is prudent and forward-looking to ponder the operating environment for the BSP in the context of the Philippine economy under an investment-grade credit rating.”

He explained that, in such a scenario, monetary authorities would essentially stick to policies that have worked thus far.

For instance, the BSP will calibrate policy settings as it deems fit to maintain financial and price stability.

“In the exercise of monetary policy, we will create an environment wherein the capacity of the economy to absorb capital flows and harness them for productive uses is enhanced,” Guinigundo said.

“To ensure financial stability, we will work closely with peer regulators and other government agencies to ensure the stability of the Philippine financial system. Cognizant of greater capital inflows, we will coordinate with fiscal authorities for a balanced and sustainable response to surges in capital flows.”

Last November, the Department of Budget and Management finally turned over the long-delayed capital infusion to the BSP. Budget Secretary Florencio B. Abad said the move was meant to help the central bank carry out its price stability functions and expand its rediscounting facility for priority projects that would stimulate the economy.