As BSP pauses, Diokno calls on gov’t to do more to temper crisis impact

by Ian Nicolas Cigaral (Philstar.com), 11 May 2020

MANILA, Philippines — Fresh from saying the central bank “has done a lot in so little time,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno took to task his former colleagues at the economic team to do more to salvage the economy from the coronavirus pandemic.

A key measure Diokno, President Duterte’s former budget chief, wanted to see is a supplemental budget to augment government funding for crisis response. His successor at the budget department, Wendel Avisado, said the economic managers have so far not considered asking Congress for additional outlay.

“We need a strong fiscal stimulus, what gets in the way is the absence of a supplemental budget,” Diokno said in an interview with ABS-CBN News Channel on Monday.

It was the strongest statement from the BSP chief yet over the need for the Duterte government to step up spending and set aside for now its “lofty” ambitions of an “A” credit rating as well as becoming an upper middle-income economy this year. Finance Secretary Carlos Dominguez III did not respond to request for comment.

“The political leadership and the economic managers should focus on saving lives, saving livelihoods and saving jobs,” Diokno said in a separate Viber message to reporters.

“The lofty goals of getting A-rating by 2022 and achieving upper-middle income status this year can wait,” he added.

To be fair, Dominguez and Acting Socioeconomic Planning Secretary Karl Kendrick Chua already went on record that bagging a higher credit rating, which lowers debt interest payments for the government, has become least of the government’s priorities.

But the narrative appears stronger than actual action. In Congress, the economic development cluster (EDC), led by the finance department, submitted for legislators’ consideration a bill containing a P711-billion stimulus package to counter economic weakness during the outbreak. But broken down, the proposal contained mostly funds for existing programs, which means the government is already spending for them.

Only P131 billion, equivalent to 0.67% of economic output, was allocated for “new programs.”

Asked if the bill dubbed as “Bayanihan II” can be considered as the government’s request for supplemental budget, Budget Secretary Avisado said “no.” “We have yet to talk about it [supplemental budget] at the EDC and DBCC,” he said in a text message.

The first Bayanihan to Heal As One Act, enacted last March 24, “strictly speaking” also contained “no new appropriations,” something which is terribly needed now, Diokno said. “Hence, the impact of the fiscal stimulus is limited,” he said.

This is way behind what BSP has done since March. Apart from lending the government P300 billion through Treasury purchases, Diokno’s central bank slashed policy rates by 100 basis points since March, and cut down mandatory bank reserves by another 200 bps. Combined, BSP’s easing measures are expected to boost liquidity by more than P500 billion, although Diokno said this will come with “a lag” of about three quarters.

“If you’re reading history, I think this is the first time that the BSP has done a lot in so little time. We have been swift, decisive and took preemptive measures as a result of crisis,” Diokno said in a briefing last Thursday.

Cash needed

In an interview two weeks ago, Budget Undersecretary Laura Pascua said there are requirements to be fulfilled before the government can ask lawmakers for a supplemental budget, foremost of which is the availability of cash to finance this budget.

The Bureau of the Treasury, keeper of public money, is the agency required to check and certify the presence of cash. Two weeks ago, Pascua had said she is unsure if there is sufficient cash in government coffers.

But so much has happened since then including the signing of as much as P105.5 billion in multilateral loans as well as issuance of government bonds to raise cash, foremost of which was the $2.35 billion in dollar-denominated global securities.

As per Philstar.com’s independent monitoring, sources of P953.65 billion in cash had already been identified by the government as of May 5. The budget agency said that as of April 27, the government spent P321.25 billion for its coronavirus response.

“We need a supplemental budget very badly and the focus should be on job-creation activities, that should be the focus of the supplemental budget,” Diokno said.