Govt seeks P160B for stimulus package
THE government is seeking up to P160 billion for its economic stimulus package, nearly half of which would be used as capital for and investments in state-owned banks, as well as loan guarantees, which could result in economic activities worth almost a trillion pesos, according to the Department of Finance (DoF).
“What we are proposing is a stimulus package with far larger effects that will increase our fiscal deficit by ninetenths of 1 percent. I think it’s around P130 [billion] or P160 billion,” Finance Secretary Carlos Dominguez 3rd announced in a virtual press conference on Thursday.
Of the proposed amount, P70 billion would be used as additional capital for state-run Land Bank of the Philippines (LandBank) and
Development Bank of the Philippines (DBP), and investments in the Philippine Guarantee Corp. (Philguarantee).
“P50 billion will be divided, roughly 70:30, between LandBank and DBP in that proportion, and another P20 billion to Philguarantee,” Dominguez added.
According to the Finance chief, the additional capital would allow the government- run lenders to support the recovery of businesses hit by the coronavirus disease 2019 pandemic by extending loans and buying bonds.
“So if you give, let’s say, LandBank an additional capital of P10 billion, you can create quite a bit of loans there. You can actually create P85 billion in loans,” he said.
Dominguez also said banks could also “form a joint venture that will be empowered to buy bonds, preferred shares or common shares in qualified companies that need support from the solvency support.”
On Philguarantee, he said every peso invested in the state-run firm could generate probably P15 or P20 worth of guarantees, which means that every peso put in there has a multiplier effect of 15 to 20 times.
“[B]y putting P70 billion into these companies, [it would] probably [generate] at least close to a trillion pesos of economic [acitivites],” Dominguez added.
The government has so far earmarked P1.49 trillion for its fourpillar socioeconomic strategy to fight the pandemic. Included in this strategy are fiscal and monetary actions aimed to fund emergency initiatives and keep the economy afloat.
These include the P200-billion estimated additional liquidity from the Bangko Sentral ng Pilipinas as a result of the 200-basispoint reduction of banks’ reserve requirement ratio that took effect in April; the P33-billion expansion in liquidity over the next 12 months after a cumulative reduction of 125 basis points in the central bank’s policy rate; and regulatory relief for the central bank’s supervised financial institutions.