The national government is set to settle its P300 billion provisional advances with the Bangko Sentral ng Pilipinas (BSP) on May 20 or almost three weeks ahead of the original maturity date due on June 11.
At the start of the year, BSP Governor Benjamin Diokno said the advances to the national government was reduced to P300 billion from P540 billion as the country bounced back from the pandemic-induced recession.
“The national government will fully settle these loans tomorrow, May 20, 2022, ahead of the maturity schedule of June 11, 2022,” Diokno said in a virtual press conference.
The central bank has been extending non-interest bearing loans to the national government since the onset of the COVID-19 pandemic as part of its heavy-lifting to cushion the impact of the global health crisis on the economy.
Proceeds of the recurring provisional advances were used by the national government to beef up its COVID-19 war chest.
The BSP’s COVID-19 measures that unleashed P2.3 trillion in additional liquidity into the financial system is gradually being withdrawn amid the strong bounce back from the pandemic-induced recession.
“Moreover, given ample liquidity, a gradual recovery in credit activity, and stable financial market conditions, the Monetary Board has decided to reconfigure the BSP’s government securities purchasing window from a crisis intervention measure into a regular liquidity facility under our interest rate corridor framework,” Diokno said.
As part of the central bank’s standard monetary operations toolkit for injecting liquidity into the financial market, the BSP chief said that the recalibrated government securities purchasing window shall enhance the BSP’s ability to manage domestic liquidity conditions and ensure the sustainability of its balance sheet.
The Monetary Board decided to lift rates for the first time in more than three years, raising key policy rates by 25 basis points due to stronger-than-expected gross domestic product (GDP) growth and accelerating inflation.
“Looking ahead, the pace and timing of further monetary policy actions by the BSP shall be guided by data outcomes, in keeping with the BSP’s price and financial stability objectives,” Diokno said.