PASB chief on IMF emergency loan: “Thank you, but no thank you”

Thank you but, no thank you.

This was the position of the country’s top monetary manager vis-à-vis an emergency cash facility that the International Monetary Fund (IMF) recently made available to its member countries to help them cope. to any capital flight caused by the COVID-19 pandemic.

In a statement to reporters, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he “sees no apparent and immediate need to take advantage” of the so-called short-term liquidity line that the IMF opened on last month.

“As I said before, structural reforms and sound economic management have helped the Philippines enter the COVID-19 crisis from a position of strength,” said the central bank chief.

The IMF’s Emergency Liquidity Plan is a new borrowing facility to help members as part of its response to the coronavirus pandemic.

It is designed to be a safety net for members with very strong policy frameworks and fundamentals, who face potential, moderate, and short-term liquidity needs due to external shocks that generate ‘balance of payments difficulties’. payments ”- an increase in dollar outflows caused by the flight of nervous investors who tend to depreciate the local currency and drive up inflation.

Diokno pointed out that the Philippine economy recorded net inflows of $ 7.84 billion at the end of December 2019, the highest level recorded in the past seven years.

Despite the challenges caused by the ongoing pandemic, the central bank chief noted that the institution continues to forecast fairly robust net inflows of $ 3.7 billion this year.

“Second, the peso is stable,” he said, noting that from the start of the year until May 15, the local currency has outperformed most of its peers in the region, having suffered the least depreciation.

The peso, he said, is just behind the new Taiwan dollar, which is the only currency to have appreciated against the US greenback so far this year.

Diokno also pointed to the Philippine dollar reserves held by the central bank, describing the total amount as “significant”, at $ 89 billion at the end of March 2020, which is equivalent to 5.3 times the short-term debt based on the original maturity and 3.8 times on the basis of the residual maturity.

“This is enough to cover 7.9 months of imports of goods and services and primary income payments,” he said, adding that central bank planners predict gross dollar reserves will increase to “about $ 93 billion by the end of 2020”.

Finally, Diokno said the ratio of total government debt as a percentage of annual economic output remains “manageable.”

“As a percentage of [gross domestic product], debt was estimated at less than 40% at the end of 2019, ”said Diokno – a level that will give the government enough leeway to borrow funds for the massive spending needed to restart the Philippine economy after the pandemic.

Published by the BST

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