Stimulus plan may still include BSP recapitalization

MANILA, Philippines – Economic officials said the P40-billion recapitalization of the Bangko Sentral ng Pilipinas (BSP) could still be included in the stimulus plan if planners would agree to raise the deficit ceiling this year.

Finance Secretary Margarito Teves said the Department of Finance (DOF) agreed with the need to recapitalize the BSP and fold it into the stimulus plan since it would facilitate infusion of liquidity into the market but said economic officials would have to make a judgement call on how far they would allow the deficit to expand.

“Because the BSP recapitalization would increase our deficit, (Budget) Secretary Rolando Andaya preferred to give priority to the fiscal stimulus,” Teves said. “But we have to look at the stimulus plan again, its just that every week there are requests for additional funding. We have to prioritize.”

But Teves said the deficit ceiling is “not cast in stone” and could still be adjusted based on subsequent reviews of the Development Budget Coordinating Committee (DBCC).

Teves said yesterday that Budget officials had opted to “give priority” to focus the budget on the P330-billion economic stimulus plan that did not include the recapitalization of the BSP.

“Remember we don’t have the fiscal revenue and it is increasingly difficult for us to handle our debt,” Teves said.

The BSP has pushed for the inclusion of its P40-billion recapitalization plan in the stimulus program but Teves said this was a difference in point of view among economic planners.

The recapitalization of the central bank, however, has been viewed by international funding institutions particularly the International Monetary Fund (IMF) as potentially critical to monetary policy-making.

“Each side has its point of view,” Teves said. “The BSP is correct in that it can help them and that with the recapitalization they would be in a better position to provide monetary stimulus.”

“It is the same thing that others say about increasing the deficit,” Teves pointed out. “It’s a judgement call for us, we also have to be careful about enlarging our deficit.”

But Teves said the deficit ceiling was not the end-all-and-be-all that critics say. “It’s just a cap and not cast in stone,” he said. “We have to review the situation.”

Teves said the 2.2-percent cap on the deficit as a percentage of the gross domestic product was “something that we are comfortable with.”

Keeping the deficit at 2.2 percent of the GDP meant that the government could not allow its budget gap to exceed P250 billion. “This is the level we consider within the realm of fiscal discipline,” he said. “But we don’t know how the real situation would take place in the coming days.” – Des Ferriols, Philippine Star