The country’s finance chief sees no need to borrow more than the current loan programs of the government, especially as the government expects a “big bounce back” in the economy next year, amid the development of coronavirus disease 2019 vaccines.
Carlos Dominguez, Department of Finance secretary, was asked in an interview on Bloomberg TV if the government needs to borrow more, particularly from the central bank.
“At the moment we have borrowed P540 billion (from the central bank) and at this point in time, we don’t see any need to do so,” Dominguez said.
The Bangko Sentral ng Pilipinas (BSP) approved the request of the national government last October 1 for “fresh provisional advances” worth P540 billion.
The short-term loan will be used for “deficit financing as a result of the coronavirus pandemic.” The national government is expected to settle the P540 billion “on or before December 29, 2020 at zero interest.”
Considered as the lender of last resort, the BSP may make direct provisional advances with or without interest to the national government to finance expenditures authorized in its annual appropriation, pursuant to Section 89 of Republic Act No. 7653 or the New Central Bank Act.
“But again, we still have some reserve amounts in the central bank and with our other creditors, and we are just waiting to see if we will need them, depending on how long this contagion is going to last,” Dominguez said.
“But with the development of safe and effective vaccines by next year and their availability, we see no need to get out of the normal loan programs that we have planned,” he added.
Dominguez said the government is assuming that an effective vaccine will be available sometime by the first half of next year.
“That should inject a lot of confidence back into our country, and as a result of that, we do expect a big bounce back in our gross domestic product (GDP) growth next year,” he said.
“When this contagion hit us, we’re in very good financial condition. As you know, our debt-to-GDP ratio has been the lowest it’s ever been at the end of 2019,” Dominguez added. “So while we are seeing a drop in GDP growth, we are still in very good financial health.”