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BSP chief sees no need to tap IMF facility amid crisis

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PHILSTAR/GEREMY PINTOLO

THE PHILIPPINES does not need to tap International Monetary Fund’s (IMF) credit line for economies affected by the pandemic, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said, citing the country’s sound economic management which put it at a “position of strength” before the coronavirus disease 2019 (COVID-19) hit.

“BSP sees no apparent and immediate need to avail of IMF’s short-term liquidity line (SLL)… Structural reforms have helped the Philippines enter the COVID-19 crisis from a position of strength,” Mr. Diokno told reporters in a Viber message on Monday.

The SLL was rolled out by the IMF in April as an on demand financing tool to help economies avoid longer-lasting solvency problems as they face the pandemic.

“It is designed to be a liquidity backstop for members with very strong policy frameworks and fundamentals, who face potential, moderate, short-term liquidity needs because of external shocks that generate BoP (balance of payments) difficulties,” Mr. Diokno said.

IMF Resident Representative to the Philippines Yongzheng Yang said there is no deadline for the availment of the SLL.

“There is no deadline. It is not just for this crisis. The repurchase (repayment) period is one year,” Mr. Yang said in an e-mail, noting that the country is eligible to apply for assistance under the facility.

The Philippines has been under lender status with the IMF since 2011.

Mr. Diokno noted that the country is armed with strong macroeconomic fundamentals, such as a seven-year high BoP surplus of $7.84 billion as of end-December, a resilient currency, ample dollar reserves, as well as a manageable debt-to-gross domestic product (GDP) ratio.

“The peso has outperformed most of its peers in the region…and is second to the Taiwanese dollar which is the only currency that appreciated versus the dollar,” he said.

Gross international reserves as of end-March stood at an all-time high of $88.99 billion, enough to cover 7.9 months of imports, BSP data showed.

The Philippines also posted a record low debt-to-GDP ratio of 39.6% last year.

Security Bank Corp. Chief Economist Robert Dan J. Roces said Mr. Diokno’s stand to not tap the IMF facility is an assurance that the country is in a position of strength.

“Strong economic fundamentals essentially mean the absence of a solvency problem in the longer term,” Mr. Roces said in an e-mail.

“Thus, the option to dispense with the SLL because the BSP sees no short-term liquidity problem that can become a deeper and longer-lasting solvency problem. This validates the position of strength for our economy,” he added.

But despite the ample buffers of the economy against the coronavirus crisis, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion is of the view that tapping the facility will mean no harm for the country.

“The purpose of the special line, I believe, is perfect for the Philippines of today. If needed, I do not think using the credit line is going to be a problem,” Mr. Asuncion said in a text message, noting that the financial strength of the country is at its “best ever” right now.

So far, loans secured by the country for its COVID-19 response include totalled $600 million from the World Bank and $1.5 billion from the Asian Development Bank. — Luz Wendy T. Noble





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