Nat’l gov’t settled P300B loan to BSP in advance — DOF

More than a month before the Duterte administration steps down, the national government has paid in full its P300-billion loan with the Bangko Sentral ng Pilipinas (BSP) on Friday morning, the Department of Finance (DOF) said.

In a statement, the DOF said the national government settled the P300-billion provisional advances to the central way ahead of its actual maturity date of June 11, 2022.

The Finance Department noted that repayment fulfills the goal of Finance Secretary Carlos Dominguez III to “unwind the pandemic-related liquidity support from the BSP before the start of the next administration.”

The provisional advances is a temporary measure under Section 89 of Republic Act (RA) No. 7653 or The New Central Bank Act that allows the BSP to extend short-term financing to the national government in the amount of up to 20% of the state’s average annual income in the past three years.

The grant of provisional advances had enabled the government steady access to cash for the uninterrupted delivery of large fiscal response and recovery measures despite the lower  revenue collections and disruptions to financial markets experienced throughout the last two years, the DOF said.

With the sustained economic recovery and consequent strengthening of revenue collections last year, the volume of the provisional advances was downsized from P540 billion in 2021 to P300 billion in January this year, which is only half of the maximum available amount of P600 billion, it said.

The Finance Department emphasized that early repayment was made possible by “the sooner than expected return of the economy to its pre-pandemic strength.”

The country’s gross domestic product (GDP) grew faster than expected in the first quarter of the year at 8.3%, helping the national government achieve revenue collections growth of 12.6% over the same period.

With the strong revenue performance, the deficit only reached P317 billion, leaving the government at a strong cash position, the DOF said.

“The advance payment of the national government's P300-billion provincial advances from the BSP underscores the continued strong fiscal position of the Duterte administration despite the financial challenges from the pandemic and, later, the Russia-Ukraine conflict. Its solid macroeconomic fundamentals--made even stronger by the game-changing reforms carried out by President Duterte during the COVID-19 crisis to further liberalize the economy and attract investors--will return the Philippines soon enough to its  pre-pandemic path of rapid and inclusive growth,” said Dominguez.

The DOF said the government was already able to raise 35% of its full-year financing requirement of P2.212 trillion at the end of March.

It added that the government was able to raise P233 billion from loans and bonds in the external market and P549 billion through the issuance of government securities in the domestic market, despite the challenging financing conditions related to the normalization of global interest rates and spillovers from the military conflict between Russia and Ukraine.

The repayment of the P300 billion outstanding provisional advances culminates the pandemic-related financing assistance of the BSP and is part of a broader exit strategy from the accommodative policies that once helped the economy stay afloat but are no longer needed based on growing evidence that economic recovery is already firmly entrenched, according to the DOF.

The P300-billion provisional advances carry zero interest, and three-month maturity with another three-month extension.

“Funds granted under this short-term lending arrangement serve as a liquidity gap measure that ensures the government will be able to undertake large spending in advance of anticipated revenue collections or regular borrowing proceeds,” the DOF said. — RSJ, GMA News