• BSP needs more funding

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    The Bangko Sentral ng Pilipinas (BSP) is still seeking for additional funding despite the completion of its initial P50-billion capitalization this year, a high-ranking official said over the weekend.

    In an interview, BSP Deputy Governor Diwa Guinigundo said that there are two strands in the proposed additional capitalization of the central bank.

    He said that one of the strands is the conclusion of the original P50-billion required capitalization of the central bank pursuant to Republic Act 7653, or the The New Central Bank Act.

    “For 20 years, we were walking or perhaps running with one leg. Despite that, we were able to deliver our mandate to promote price stability,” he said.

    Guinigundo added that the second strand is the proposed amendment of the BSP Charter that seeks for additional P150-billion capitalization for the BSP.

    “We have been saying that the economy grown many times over since 1993. The financial system which we supervise has also grown many times over since 1993. But the capitalization of the BSP has just been completed this year,” he said.

    With the proposed amendment, the BSP official said that the government may consider additional funding in the budget, or the issuance of government securities in providing the proposed additional capitalization of the central bank.

    “First is to do it through government securities. The government could provide us T-bills or T-bonds. That can be used as additional collateral for our open market operations,” he said.

    Government securities are debt instruments issued by the Philippine government or any of its instrumentalities to finance public expenditures.

    Guinigundo said that the issuance of government securities will not be burdensome for the government, since it could result in a better fiscal environment.

    “If we have enough securities to collateralize our borrowings from the markets, then we will be able to deliver our mandate to keep price stable. If the prices are kept stable, interest rate will continue to be low and stable. So if interest rate is low and stable, the cost of the government in terms of its borrowings will also come down. So it will provide benefits to fiscal authorities as well,” he said.

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