BSP: P1.5T in liquidity released to financial system due to monetary easing

The monetary policy easing measures implemented by the Bangko Sentral ng Pilipinas (BSP) has poured more than a trillion pesos into the financial system, ensuring availability of cash for borrowers in need of money amid the COVID-19 pandemic.

“Nakapag-release na kami, in terms of increased liquidity sa sistema ng P1.5 trillion,” BSP Governor Benjamin Diokno said during the state-run PTV’s Laging Handa public briefing on Wednesday.

“That is equivalent to 7.6% of our gross domestic product (GDP),” Diokno said.

The central bank chief explained that the cut in reserve requirement  — the amount of cash banks are required to hold in reserve — for universal and commercial banks of 200 basis points and interest rate reduction by 175 basis points has injected additional liquidity in the financial system.

The BSP also slashed reserve requirement for thrift banks and rural banks by 100 basis points.

“Bawat isang percent na cut... P100 billion ang nire-release sa financial system,” Diokno said.

With monetary easing measures, Diokno said the central bank saw an increase in the amount of bank loans extended to micro, small and medium enterprises (MSMEs), which comprise 99% of businesses in the Philippines.

“As of August, we saw P109 billion additional lending to MSMEs,” the BSP chief said.

Diokno also noted that the Philippines is on a strong footing prior to the onset of the pandemic as the country has ample gross international reserves and the debt-to-GDP ratio was at its record-low.

“Napakaganda ng ekonomiya natin. Napakarami nating dolyar ngayon, close to $100 billion gross international reserves so walang threat na hindi tayo makakabayad ng utang. Hindi tayo mauubusan ng dolyar,” he said.

“When the pandemic hits us, ang utang is 39% of GDP [in 2019]... Ang 60% [debt-to-GDP] below okay na,” Diokno said.

A lower debt-to-GDP ratio indicates that the country has more resources relevant to its obligations, which gives it more capacity to pay external and domestic credit.

“We should not lose track of where we want to be... kay patuloy na ginagawa ang structural reforms na dapat gawin,” Diokno said.  —KBK, GMA News