No need for IMF facility amid COVID-19 – Diokno

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the Philippines does not need to tap the International Monetary Fund’s (IMF) pandemic’s response facility with still enough resources and reserves to fight against the threats of COVID-19.

“BSP sees no need to avail of IMF’s Short-term Liquidity Line (SLL),” said Diokno on Tuesday, stressing on the country’s macroeconomic sustainability, healthy reserves and a strong external sector as buffers and therefore there is “no apparent and immediate need” for the IMF facility which he described as a new borrowing instrument for IMF members requiring assistance coping with the pandemic.

“It is designed to be a liquidity backstop for members with very strong policy frameworks and fundamentals, who face potential, moderate, short-term liquidity needs because of external shocks that generate BOP (balance of payments) difficulties,” he explained.

But as Diokno said before – “(the) structural reforms and sound economic management have helped the Philippines enter the COVID-19 crisis from a position of strength” and could handle the health scare on its own, for now.

“First, the country has an overall BOP surplus amounting to $7.84 billion as end-December 2019, the highest in the last seven years. This is two times higher than the $3.7 billion surplus projected for this year. Second, the peso is stable. Year-to-date (as of May 15) the peso has outperformed most of its peers in the region which is least depreciated and second to the TWD, which is the only currency that appreciated versus the US dollar,” noted Diokno.

The BSP chief said that the country’s gross international reserves (GIR) continue to be robust and is estimated to reach $93 billion this year.

“(Philippines) has a hefty GIR (of) $89 billion as of end-March 2020… BSP projects that the GIR would be in the neighbourhood of $93 billion by the end of 2020,” said Diokno. And fourth – “(the country) has a manageable debtto-GDP ratio. As a percentage of GDP, debt was estimated at below 40 percent as of end- 2019.”

In 2010, afters years in a row of BOP surpluses, the Philippines became a creditor-member of the IMF after decades of being a debtor-member. Although it was in 2006 since the BSP paid the country’s last obligations with the IMF, marking its exit after more than 30 years of IMF tutelage, its status was changed only in 2010.

As a creditor-member to the IMF, the BSP in its own right is a participant of two IMF facilities — the Financial Transactions Plan (FTP) and the New Arrangements to Borrow (NAB) — despite shortfalls in the external payments accounts in some years.

Both FTP and NAB are global financial safety nets that creditor member countries to the IMF are part of.

The Philippines’ position in the NAB amounts to $460 million and about $415 million in the FTP.