Benjamin Diokno, governor of the Bangko Sentral ng Pilipinas, said the National Government is seeking another provisional advance of P540 billion. Photo taken on Feb. 5. — GERIC CRUZ/BLOOMBERG

THE National Government (NG) is asking the Bangko Sentral ng Pilipinas (BSP) for P540 billion in additional financial assistance to help plug the widening budget deficit due to the coronavirus disease 2019 (COVID-19) pandemic.

“The NG has requested for a fresh provisional advance of P540 billion to be settled on or before 29 December 2020, at zero interest,” Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said in a Viber message to reporters.

Mr. Diokno said the NG’s request will be formally submitted to the Monetary Board “soon.”

The debt plan comes immediately after the Bureau of the Treasury repaid the P300 billion it borrowed from the central bank in March through a repurchase agreement of government securities. A pandemic relief law signed earlier this month also temporarily raised the cap on advances the central bank can provide the government, while lengthening the repayment period to as long as two years.

Republic Act (RA) 11494 or the Bayanihan to Recover as One Act allowed the BSP to lend 30% of its average revenue, an increase from the 20% limit under RA 7653 or The New Central Bank Act. This would allow the BSP to lend up to P850 billion from the previous cap of P540 billion.

If the new request is approved, direct provisional advances from the central bank to the NG will reach P840 billion, only P10 billion short of the P850-billion limit.

The fresh financial assistance from the BSP would boost the country’s coffers in its fight against the pandemic, according to UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.

“We’re in a crisis, and all possible ways to survive this crisis needs to be explored. Of course, it has to be within the rules,” Mr. Asuncion said in a text message.

The economy is facing its steepest contraction in over three decades, as the pandemic drags on. The Health department on Wednesday reported 2,426 new coronavirus infections, bringing the tally to 311,694.

The government expects this year’s budget deficit to reach up to 9.6% of gross domestic product (GDP).

In a note on Tuesday, Hongkong and Shanghai Banking Corp. analyst Noelan Arbis warned that increased additional direct provisional advances could erode the BSP’s credibility as an independent institution from fiscal authorities “if it is repeated beyond the current crisis.”

“For now, the fact that the additional amount is only accessible to the government within the next two years provides a somewhat credible exit strategy,” Mr. Arbis said. — Luz Wendy T. Noble with Bloomberg