THE CENTRAL BANK approved another short-term loan worth P540 billion to the National Government to boost its coffers as the pandemic continues.

“We recently extended our arrangement with them — P540 billion, we just renewed our assistance to the government,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said at a briefing on Thursday.

This is the fourth time the National Government has received support from the central bank, which has extended a direct advance of P300 billion in March 2020, P540 billion in October 2020 and another P540 billion in December 2020.

“They paid the P540 billion (last month), now they’re asking for a renewal and the Monetary Board has approved it,” Mr. Diokno said.

Under Republic Act 7653 or The New Central Bank Act, the BSP is allowed to lend 20% of its average revenue to the government, which is equivalent to P540 billion. This was increased to 30% or up to P850 billion by the Republic Act 11494 or the Bayanihan to Recover as One Act which allowed direct provisional advances within two years since the law’s effectivity.

“It’s within the bounds of the BSP’s charter and it’s a convenient way to source funding. The National Government anyway has fully paid its previous obligations to the central bank,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

The fresh funds could also be used for a stimulus measure, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said.

“With the National Government tapping the BSP for this cash advance, perhaps lawmakers and administrators can find a way to utilize these proceeds to fund the much-needed spending measure with growth momentum in dire need of assistance,” Mr. Mapa said in an e-mail.

Economic managers have ignored calls for another stimulus package. House Bill 9411 or Bayanihan III which seeks to allocate a stimulus package worth P400 billion has been approved by the House of Representatives, but a counterpart measure remains pending at the Senate committee level.

Meanwhile, Mr. Mapa cautioned that having the central bank provide substantial cash support to the National Government may cause risk-off sentiment from investors if they see the move already going beyond what they expected to be a temporary means of support from the BSP.

“For now, its unclear as to how long investors will be forgiving on this issue but one can surmise that once investors begin to feel that such an arrangement is no longer as “transitory” as initially envisaged, we could see an adverse reaction quickly after that,” he said.

Mr. Diokno said the central bank will retain its accommodative policy, and will assess data to avoid a premature withdrawal of support that may hurt recovery.

“When the recovery becomes fully self-sustaining, the BSP will aim to implement a pre-planned strategy for the unwinding a policy stimulus, taking care to ensure the sustainability of recovery while also guarding against any emerging threats to the BSP’s price and financial stability objectives,” he said. — L.W.T.Noble