The central bank’s moves to support the economy amid the pandemic has led to a liquidity infusion of P1.9 trillion into the financial system.

“The Bangko Sentral ng Pilipinas (BSP) has injected approximately P1.9 trillion (or $39.2 billion) in liquidity into the financial system. This is equivalent to 9.6% of the gross domestic product,” BSP Governor Benjamin E. Diokno said in a Viber message to reporters.

“The amount includes the new provisional advance of P540 billion which is targeted to be released in the first week of October,” he added.

On Oct. 1, the Monetary Board approved the additional advances to the national government, following the P300 billion repurchase agreement of the BSP with the Bureau of the Treasury that was fully paid in September.

Republic Act No. 7653 or the Bayanihan to Recover as One Act authorized the BSP to lend up to 30% of its average revenue to the national government, higher than the previous 20% limit. With already P840 billion in direct provisional advances, the BSP can still lend P10 billion to the national government.

“The BSP is working hand-in-hand with the national government to ensure that the coronavirus pandemic will leave little permanent scar on the Philippine economy and its people,” Mr. Diokno said.

In August, domestic liquidity rose 14.2% year on year to about P13.6 trillion from the 14.7% expansion pace in July, BSP data showed. However, bank lending has yet to pick up, with outstanding loans by big banks only growing by 4.6% in August, easing from the 6.7% in July and the slowest since the 4.4% in November 2006.

In its latest policy review last Oct. 1, the BSP has cited ample liquidity as part of the reason for maintaining the overnight reverse repurchase, lending, and deposit rates at record lows of 2.25%, 2.75%, and 1.75%.

“Given limited government funds for additional stimulus measures, monetary easing may have to do more weight lifting in terms of providing more support measures needed most by the economy at this time,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Mr. Ricafort said another reduction in the reserve requirement ratio of banks as liquidity support remains possible given the Monetary Board authorized up to 400 basis points of reduction this year.

So far, the BSP has slashed reserve requirements by 300 bps – 200 bps for big banks and 100 bps for thrift and rural banks. — Luz Wendy T. Noble