Over P1T infused into PH financial system

THE Bangko Sentral ng Pilipinas ( BSP) already injected more than P1 trillion in additional liquidity into the financial system to stimulate the country’s economy, one of its top officials told lawmakers on Friday. This comes after BSP Governor Benjamin Diokno earlier stressed the gradual and prudent unwinding of the central bank’s coronavirus disease 2019 (Covid-19) response, and as the Bangko Sentral released its latest money supply data that showed a sustained increase in March.

During a Senate hearing, BSP Deputy Governor Francisco Dakila, Jr. said “our estimate is that the total liquidity support is equivalent to about P1.1. trillion to date.”

Of the total, P33 billion were freed up through the 125-basispoint (bps) cut in the BSP’s key policy rates so far this year. The amount translates to about 0.2 percent of the country’s gross domestic product (GDP).

The central bank also injected P300 billion into the economy through its repurchase agreement with the Bureau of the Treasury, which is equivalent to 1.6 percent of GDP. The 200-bps total reduction in banks’ reserve requirement ratio translated to P200 billion worth of liquidity released into the system, or 1.1 percent of GDP. Dakila also underscored the suspension of the central bank’s liquidity-mopping term deposit facility, which added about P300 billion to the system. The volume offering for overnight reverse repurchase was also reduced to P100 billion, releasing P205 billion. The BSP also remitted P20 billion in dividends to the national government. Dakila’s statement came a day after Diokno said such measures indicated the central bank’s unwavering commitment and readiness to deploy all its instruments to provide liquidity and ensure an efficient financial system.

At a webinar hosted by the Financial Executives Institute of the Philippines and the Management Association of the Philippines, Diokno said “the decision to unwind Covid-19 policy responses must be done in a gradual, prudent and informed manner.”

“Complete risk assessment based on all available data must support the decision and timing of unwinding. Likewise, appropriate communication must accompany the decision to unwind,” he added.

Also on Friday, the BSP reported that domestic liquidity or M3 expanded by 13.3 percent year-onyear to P13.12 trillion in March, faster than the 10.9 percent in February. Month-on-month and seasonally adjusted, M3 grew by 2.4 percent.

Domestic claims gained pace at 11.9 percent in March from February’s

10.3 percent, “due mainly to the sustained growth in credit to the private sector,” the central bank said.

Net claims on the central government grew by 21.6 percent from 18.4 percent the previous month, “reflecting the increased borrowings by the national government” it added.

Net foreign assets in peso terms increased by 9.1 percent, slower than February’s 9.6- percent growth.

“Demand for credit remained the principal driver of money supply growth,” the Bangko Sentral said.

Loans for production activities were driven mainly by lending to real estate activities; financial and insurance activities; wholesale and retail trade, repair of motor vehicles; electricity, gas, steam and air conditioning supply; and information and communication.

“Meanwhile, loans for household consumption eased due mainly to the slower growth in credit card and motor vehicle loans during the month,” the BSP said.