MANILA, Philippines – The deputy governor of the Bangko Sentral ng Pilipinas (BSP) on Monday said it is no big deal that the Philippines pledged $1 billion to the International Monetary Fund (IMF) to help troubled European economies.
“There is no big deal in our lending $1 billion. The BSP has the power to handle our international reserves,” Deputy Governor Diwa Guinigundo told radio dzMM.
He also refuted former National Treasurer Leonor Briones’ statement that the $1 billion is the Philippines’ way of “showing off” even though it is still heavily in debt. He said that since the $1 billion is a loan that will be paid with interest, the Philippines actually stands to gain from the transaction.
“Wala po tayong nais na ipagyabang. Ito po ay isang gawa ng pagpapakumbaba. Sinasabi natin na we recognize that we could be vulnerable to any spillover effect from Europe…It is now showing off but an action to stop the spread of the problem into emerging markets,” he said.
He added: “We are not giving the $1 billion just because we want to be called a creditor country.”
The Philippines currently has $77 billion in gross international reserves, which are invested in different financial instruments such as US treasuries or Japanese bonds.
Guinugundo said under the BSP Charter, the central bank can give loans to international financial institutions such as the IMF. He said the IMF asked the Philippines to invest in a “firewall fund”, estimated to reach $460 billion, to quench any spillover effect of the European crisis to other nations.
He also noted that Europe is an important market for the country’s exports. He said at least 17% of overseas remittances come from Europe, which could be affected if some European countries go under.
“Europe is on fire now. The IMF is asking other countries not affected by the crisis to help put out the fire to prevent it from spreading to other nations including the Philippines,” he said.
Greece may tap fund first
Guinugundo said the $1 billion loan is an investment that will earn 0.3% interest “although it varies periodically.” He said Greece may be first to seek help from the IMF.
“We didn’t give the money. It’s a loan. Our international reserves are still at $77 billion because the money is not lost. Our foreign exchange in total reserves went lower but our reserve position in the IMF went higher. We can encash it anytime because the loan to the IMF is considered liquid and is part of our gross international reserves,” he said.
He said Thailand and Malaysia also pledged $1 billion each, Singapore pledged $5 billion, China $43 billion and Japan $60 billion.