The Bangko Sentral ng Pilipinas (BSP) has injected P2.3 trillion ($46 billion) in liquidity to the financial system as of mid-October as part of its pandemic response.
BSP Governor Benjamin E. Diokno said the latest liquidity infusion is now equivalent to 12.8 percent of the country’s full-year nominal gross domestic product for 2020.
“The BSP believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction,” said Diokno in a business forum.
He also said that the BSP will continue to support the economy by keeping an accommodative monetary policy stance “for as long as necessary to ensure the country’s strong and sustainable economic recovery.” The Monetary Board has kept the policy rate steady at two percent since November 2020.
At the onset of the pandemic in 2020, the BSP applied extraordinary liquidity measures to help the government fund the anti-pandemic measures. These include provisional advances to the National Government, purchases of government securities in the secondary market, and payment of advance dividends even though the BSP is no longer required to remit dividends to the government.
Other measures which infused fresh liquidity to the financial system primarily to “boost market confidence” and to ensure “availability of low cost credit resources” is the BSP’s interest rate cuts and the reduction of the reserve requirement ratio.
Based on a BSP report, in the third quarter (July to September) the BSP has absorbed P2 trillion of excess liquidity.
The BSP essentially removes money from banks to park these excess money with the BSP to earn fixed interest rates. The main objective of these monetary operations is to control and manage inflation.
Source: Manila Bulletin (https://mb.com.ph/2021/11/07/bsp-infuses-p2-3-t-in-new-economic-booster/?utm_source=rss&utm_medium=rss&utm_campaign=bsp-infuses-p2-3-t-in-new-economic-booster)
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