Bayanihan 2 exposes BSP to burden sharing

An economist said Monday the newly-signed Bayanihan to Recover as One Act, or Bayanihan 2, opened the door for more “burden sharing” for the Bangko Sentral ng Pilipinas.

ING Bank Manila senior economist Nicholas Mapa said in a report the Bayanihan 2 law raised the cap on the amount the central bank can advance to the national government from 20 percent to 30 percent, translating into an increase in the ceiling from P540 billion to P850 billion.

“At the height of the crisis, BSP rode in to support the national government, unloading a cool P300 billion to help fund COVID-19 relief efforts at a time wherein the national government was struggling to collect revenues,” he said.

“The advance was made via a 3-month repurchase agreement [extendable to 6 months] that will expire at the end of this month and with the timely passage of Bayanihan 2, this opens the door for a more hefty ‘burden sharing’ arrangement between the fiscal and monetary authorities,” Mapa said.

He said the prospect of engaging in debt monetization always caused central bankers and investors to cringe given the probable negative implications on the currency and the inflation rate.

Topics: Bayanihan to Recover as One Act , Bayanihan 2 , Bangko Sentral ng Pilipinas , BSP , COVID-19
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