I chanced upon the column of Mr. Tony Lopez in the Manila Standard (5 October 2018, page 5) where he stated that the BSP lent $1 billion to countries in Europe, to quote:
“The Philippines used to have record foreign reserves of more than $80 billion. The country did not use it to import enough food. Instead, our Bangko Sentral lent $1 billion of those reserves to the bankrupt countries of Europe. “
I would like to point out a few things to make his statement factually accurate:
1. The BSP committed to provide $1 billion to the IMF, through its Bilateral Borrowing Facility, to support the need of the international community in addressing global financial concerns. The commitment arose from the call of the Fund for additional resources to build the Euro firewall. Since the commitment’s effectivity in 2013 until today, this has never been called by the Fund. No resources of this magnitude for this Fund facility have been actually lent out by the BSP. This is the link where you can read more about the BSP’s participation in this facility: http://www.bsp.gov.ph/downloads/Publications/FAQs/IMF_082012.pdf
2. Aside from the Fund’s Bilateral Borrowing Facility, the BSP is part of the New Arrangements to Borrow (NAB) facility. This is a credit arrangement between the Fund and a group of members/institutions with the objective of providing supplementary resources to the IMF. The BSP has been a NAB participant since 2011 and committed to provide about $500 million to the Fund, if and when requested. As of September 2018, the IMF has drawn from the BSP a net amount of about $130 million [not $1 billion] to finance financial arrangements for some European countries. May I also share that the BSP actually earns interest income from this drawing.
3. A member/institution needs to have a strong external position to be part of the Fund’s facilities such as the Bilateral Borrowing Facility and the NAB. The BSP’s continued participation in these facilities provides a strong testament of our external strength and resiliency. We also believe that in this growing interconnected markets and technological innovations, financial cooperation, more than ever, is key to preserving order in the world economy under a VUCA (volatile, uncertain, complex and ambiguous) environment. If we deny our support to this global effort to help promote financial stability, we may be faced with a more serious fallout in terms of contagion or spillover effects. The point is to prevent this critical situation from spreading out and affecting other countries including the Philippines.
Thank you for publishing this clarification and correction.
DIWA C. GUINIGUNDO
Deputy Governor—Monetary and Economics Sector
Bangko Sentral ng Pilipinas