BSP’s COVID-19 measures unleash P2.2 T into system
The central bank has so far unleashed P2.2 trillion into the financial system to avert liquidity strains and prevent long-lasting scarring in the economy due to the pandemic.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the mobilization of monetary instruments and other extraordinary measures freed up additional funds equivalent to 12.13 percent of gross domestic product (GDP).
“Amid heightened uncertainty in the COVID-19 pandemic, monetary policy has continued to focus on supporting economic activity and market confidence,” Diokno said in his weekly virtual press briefing.
The BSP chief said the of the additional funds came from the central bank’s participation in the secondary government securities market with 6.16 percent of GDP, followed by the P540billion provisional advance extended to the national government equivalent to 3.01 percent of GDP.
Other COVID-19 response measures include the lowering of banks’ reserve requirement ratio equivalent to 1.17 percent of GDP, alternative compliance to the RRR at 1.1 percent, the 200 basis points cut in interest rates equivalent to 0.58 percent of GDP, and the P20-billion dividend remittance to the treasury equivalent to 0.11 percent of GDP.
As a result, domestic interest rates reflected in the Treasury bill auction declined gradually as liquidity expanded by 5.1 percent to P14.2 trillion in end-April.
Diokno noted market sentiment has also improved, as indicated by high oversubscriptions in the government’s primary auctions for government securities, as well as in the BSP’s auctions for its term deposits and reverse repurchase facility.
“This allowed the BSP to slowly recalibrate and normalize its monetary operabulk tions. The adjustments to our monetary operations, in time with the gradual reopening of the economy, should help facilitate the transmission of our accommodative stance to lower market rates, increase