MANILA, Philippines - Congress is not keen on the proposal allowing the central bank, the Bangko Sentral ng Pilipinas (BSP), to issue its own debt notes for greater flexibility in managing the P10-trillion Philippine economy going forward.
Leyte legislator and Committee on Banks and Financial Intermediaries Chairman Sergio Apostol, at the sidelines of activities marking the 58th annual national convention of the Rural Bankers Association of the Philippines on Wednesday, rejected the idea of allowing the BSP to sell its own debt papers for monetary-management purposes.
According to Apostol, the public is already neck-deep in debt, and allowing the BSP to sign its own debt notes will only add to the already heavy burden.
“The government sector already has too much debt,” Apostol reiterated.
He said most of the more than 200 legislators at the House of Representatives favor the idea of closely monitoring the debt activities of government agencies, including the BSP.
“Anyway, the BSP can always print money,” Apostol quickly added.
Deputy BSP Gov. Diwa C. Guinigundo said legislators, like Camarines Sur Rep. Luis Villafuerte, support the proposal, knowing the measure would go a long way in helping the BSP stabilize prices, its core function.
Guinigundo said the proposed BSP debt notes were to be short-dated lasting no more than a year before redemption becomes mandatory.
The short-maturity duration of the proposed BSP debt note was meant to convince legislators the authority was purely for monetary-management purposes rather than the creation of more public-sector debt, Guinigundo stressed.
“This was why Rep. Luis Villafuerte supports the proposal,” he said by telephone on Wednesday.
At present, the BSP is not allowed to issue its own debt papers, whose proposed issuance will help the monetary authorities manage the level of liquidity in the system in the manner it already does whenever its raises or cuts interest rates every now and then.
Such authority, Deputy BSP Gov. Nestor Espenilla pointed out will add to the stock of marketable securities that banks and financial institutions trade among themselves in the normal course of business and deepen the domestic-capital market a bit more in the process.
For now, the BSP is only allowed to engage in open-market operations, which is essentially the buying and selling of government securities to and from the banks.
Its special-deposit account, or SDA, window is also effectively a borrowing instrument that helps the BSP achieve its policy intent.
Nevertheless, allowing the BSP to buy and sell its own debt would add monetary firepower to what BSP officials privately acknowledge as a rather limited array of options.