BSP cites importance of capitalizing the central bank

By Joann Santiago

MANILA, July 29 (PNA) — A ranking Bangko Sentral ng Pilipinas (BSP) official countered allegations that the poor will not benefit from a well-capitalized central bank.

BSP Deputy Governor Diwa Guinigundo, in an SMS, explained that “we need to set aside the idea that only public policy that distributes cold cash to the poor or subsidizes their every need is the only mode of public policy that is anti-poverty.”

”We need macroeconomic stability to create the foundation for long-term sustainable economic growth that will level up people’s skills and abilities while producing infrastructures for jobs and livelihood for them,” he pointed out.

Some groups have questioned the Aquino administration’s decision to give the BSP the P40 billion balance on its mandated capital partly from pooled funds sourced from government savings and financed by what is called the Disbursement Acceleration Program (DAP).

The program was implemented in 2011-13 to boost domestic growth and financed about P144 billion-worth of high-impact and socially-responsive projects.

Of the total, the BSP received P30 billion from the DAP fund, P10 billion in 2011 and P20 billion in 2012.

In 2013, the government gave the central additional P10 billion but the fund did not come from DAP.

The BSP has been asking the government for its additional capital in line with its mandate to promote monetary and financial stability.

Under the New Central Bank Act, which instituted the BSP from the old Central Bank of the Philippines in 1993, the BSP will be given a P50 billion capitalization, P10 billion of which was given during the BSP’s first year of operations.

Amid being capitalized by only P10 billion since its inception, the BSP was able to perform its mandate but monetary officials maintain that getting their remaining capital would greatly help them address higher risks not only from the domestic financial market but also those from overseas.

During President Benigno Aquino III’s 5th State of the Nation Address (SONA) Monday, he mentioned the government’s ability to give the BSP its remaining capitalization.

Guinigundo said getting the said fund will greatly help the central bank “more effectively discharge its responsibility in promoting price and financial stability.”

“When prices are stable, the purchasing power especially of the poor is preserved,” he pointed out.

He also cited that in an environment where prices are stable “businessmen are encouraged to invest and expand their operations and in the process create more jobs.”

This also results to more economic activities, which will enable the government to increase revenues, which in turn will be used to finance government projects like roads and bridges, irrigation and drying facilities, more hospitals and hospital beds, more schools and classrooms, he said.

Guinigundo also pointed out that “when there is financial stability, the public can have better access to credit, (and) their deposits are more secured.”

”This is an important ingredient to higher level of savings, investment and production. More jobs are available, the poor – – as long as they are qualified and their skill sets are appropriate – – can have hopes to better livelihood,” he added. (PNA)