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Financial stability amid COVID-19

Atty. Jun De Zuñiga

Atty. Jun De Zuñiga

The COVID-19 pandemic has posed unprecedented and unparalleled challenges to the Bangko Sentral ng Pilipinas (BSP) in terms of maintaining financial stability in the country. Under the Constitution and its Charter, the BSP enjoys fiscal and administrative autonomy so it can function more effectively as the central monetary authority; yet it is an integral part of the Government and has to do its part to counteract the monstrous effects of the dreaded virus.

It was a pro-active BSP we have seen when in March and April of this year, it promulgated a total of 21 measures directed to provide liquidity to the National Government and to the system, to maintain price stability, to provide economic stimulus and encouragement for lending to MSMEs, and to provide relief to the banks and to its borrowers who faced financial difficulties. My own humble view is that it was a record performance and that the BSP had no reluctance in availing of the monetary instruments under its disposal to alleviate the plight of the people.

To group these measures into general categories, there was a reduction of BSP policy rates for a total of 100 basis points, and the reduction of reserve requirements for BSP-supervised entities up to maximum of 400 basis points. (The policy rate is a means by which the BSP maintains price stability in line with its framework of inflation targeting; on the other hand, the reserve requirement is a means by which the money supply can be regulated and can be lowered to stimulate the ability of banks to lend to the public.)

In addition, the BSP extended credit assistance to the National Government through a repurchase agreement with the Bureau of Treasury involving government securities. The BSP also remitted dividends to the National Government ahead of schedule. Further, the BSP cleared the following loan assistance by international organizations all relating to the government programs against COVID-19: US$ 100 million loan from World Bank; an additional US$500 million to US$1 billion co-financed by the Asian Development Bank; and US$750 million and EUR 694 million also from the ADB.

On the banking side, the BSP relaxed guidelines on the submission of applications for rediscounting, including the acceptance of additional eligible credit instruments for rediscounting. The BSP also approved a package of relief measures for banks to help manage the adverse financial impact of he pandemic on its clients. To encourage more electronic payments and thereby temper the demand for actual cash transactions, tehe BSP also waived the collection of registration and licensing fees on electronic service providers.

The fight against COVID-19 is still ongoing and both the public and private sectors are marshalling efforts in this campaign. As its Governor said, the BSP is closely monitoring the developments and will accordingly utilize its instruments as will be appropriate. Thus far, there have been encouraging factors and it is hoped that the trend will continue progressively. Inflation is within range, the peso is strong and the country has record-high forex reserves. The Economist also rated the Philippines sixth among 66 emerging economies as exhibiting financial strength in the course of the pandemic. The work goes on, however, and it is incumbent upon the entire citizenry to contribute and cooperate more.
The above comments are the personal views of the writer. His email address is

Source: Manila Bulletin (

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