BSP, DOF to coordinate on interest rate policy

The Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) have agreed to coordinate regarding interest rate policy.

In a teleconference with foreign investors in London and New York, Finance Secretary Jose Pardo and BSP Gov. Rafael Buenaventura have assured foreign investors that the fiscal and monetary authorities will continue to coordinate their efforts to assure that the country will maintain an environment conducive for investment.

"The BSP's monetary policy is still to keep interest rates at current sustainable levels given the expected continued lower inflation rate," Buenaventura said.

The BSP chief said the BSP will remain sensitive to the movements of interest rate abroad. "We feel reasonably comfortable that with a smaller budget deficit this year, and exports continuing to be strong we felt exchange rate and interest rate will probably be stable," he added.

National Treasurer Leonor Briones said a decline in interest rates is sustainable since the National Government is expecting a better collection from the Bureau of Internal Revenue by March this year.

She also believes that the government can sustain the low interest rate regime given the expected improvement in the economy. "I am assuming that there will be a steady increase in economic growth this year, that there will be a bigger than-expected target revenue collections, that the inflation rate will remain low," she added.

Pardo and Buenaventura both believed that interest rate will remain low if the National Government would be able to maintain a manageable budget deficit.

Pardo is urging the Congress to pass various reform measures that would help in fiscal consolidation. "We feel there is now a determined effort to (undertake) the reforms. We are coordinating closely and we will use LEDAC mechanism (which includes representatives from Congress to see to it that reforms are to be implemented)," Pardo said.