$1- B Loan Boosts Global Stability

          Malacañang said yesterday that the country 's $1-billion contribution to the pool of funds the International Monetary Fund (IMF) is drawing up for lending to the economies in the European Community that are in financial dire straits will help promote global stability, while the Bangko Sentral ng Pilipinas (BSP) stands to earn interest from the transaction.

                   Presidential spokesman Edwin Lacierda emphasized that it is in the interest of the Philippines
 to help promote global stability in order to shield overseas Filipino workers from any possible economic fallout." It is a loan and the BSP will earn from the transaction," former BSP Governor Gabriel C.Singson said in an interview with the Manila Bulletin.The BSP contribution to the IMF facility under the Financial Transaction Plan (FTP) is a form of portfolio diversification.It does not constitute lending per se, but more importantly helps the economies in the Eurozone going on a tailspin,thereby, averting any spill-over on the Philippine economy.

                  Under the transaction, the BSP earns interest rate of 0.3 percent, which is higher than the US Treasuries currently playing at 0.29 percent and carries a tenor or 10 years between BSP and IMF.On the other hand, economies from the Eurozone borrowing from FTP will have a maturity, ranging from three months to ten years depending on the amount loaned.The IMF has asked nations with strong dollar reserves to contribute to the FTP to assist, in particular, nations in the Eurozones facing financial difficulty and to avert any negative spill-over effect on other countries and the global economy, in general. The IMF is aiming to raise more than $400 billion for the FTP.

                   Singson stressed this amidst the flurry of criticisms BSP has been receiving from lawmakers, some of whom suggested that to enter into such a transaction would require congressional approval."The BSP can engage in inter-national transactions like borrowings.When we borrow, do we need Congressional approval?" Singson asked.

                   But Sen. Ralph G. Recto said BSP, as a creation of Congress, could not claim sole proprietary rights over the country's dollar reserves and should seek consensus first or secure appropriation cover from Congress."I'm not totally opposing it but how can the government, though the BSP lend money to IMF without authority from Congress?" the senator asked. 

                   It was stressed that the country's dollar reserves is not part of the general fund of the national government and, therefore, could not be used for maintenance and operating expenses such as paying salaries of state employees and finance vital infrastructure projects. According to BSP Deputy Governor Diwa Guinigundo, the monetary authorities have approved the country's contribution to the FTP. The Department of Finance has been consulted about it and has given its consent, Guinigundo said.

                On June 19, the Palace has given the green for the BSP to proceed with the country's participation to the FTP.


                 To date, the Japanese government has pledged to infuse $60 billion; China, $43 billion; and Indonesia and Thailand, $1 billion each.BSP  builds up the reserves by buying the dollar holdings of the private sector that needs peso or local currency. It also buys the foreign loan proceeds of the national government.

                Despite these assurances, Recto said the government, particularly the Bangko Sentral ng Pilipinas (BSP) owe it to the Filipino people to clarify its move to commit $1billion of the country's dollar reserves for the economic bailout being packaged by the IMF  for troubled European economies. Recto said the BSP  must clearly explain to the people why the government is lending out to IMF while it continuously borrows from international lending and multilateral institutions for budgetary support and deficit spending.







Source: Manila Bulletin, June 27, 2012.



In my humble opinion, the Aquino administration simply wants to make a good name, and I don't see any rational explanation why this third world country of ours will be giving such a mind-boggling amount.Aquino's administration have always been campaigning the right path towards full prosperity, this action should not only needs Congressional approval but also, it clearly needs the Filipino people's approval.We also are in dire need.It's OUR money. We do trully deserve a fine explanation from them.This is not the right time for the government to make such big decisions.


For the readers, I would like to leave a few questions. I would like to know your side :)

• Do you think the lawmakers should strengthen their authority with regards to the gov't lending money?
• Is the lending of the money reasonable ?
• If you were Pres. Aquino, would you lend the money to the foreigners ?