NG not inclined to infuse add’l P40B in BSP

Even with the Arroyo administration on the verge of balancing its budget for the first time, finance officials said the National Government (NG) was still not inclined to take up the capitalization of the Bangko Sentral ng Pilipinas (BSP) any time soon.

Although tentative discussions have begun to explore the possibility of funding the P40 billion that the NG still owed the BSP under the central bank charter, finance officials said priorities would not allow such a huge budgetary undertaking.

Under the New Central Bank Act of 1993, the government is required to infuse at least P50 billion into the BSP as the country’s central monetary authority or CMA.

However, the NG has so far only subscribed up to P10 billion, with P40 billion still has to be discussed in the future. The additional capitalization for BSP, however, has since been shelved as the government fell into fiscal disarray.

With the balanced budget now in sight, however, initial discussions have been conducted to determine the possibility of at least putting the P40 billion subscription on the calendar.

According to finance officials, however, the BSP has done extremely well on its own even without additional capitalization from the NG.

Finance officials said that as a matter of appropriations protocol, the BSP capitalization is always in the national budget proposal but is always replaced by other programs deemed more critical and immediate.

According to the Department of Finance (DOF), it conducted a preliminary analysis of all the CMA’s in developing countries to determine how the BSP compared with other central banks.

Shortly after the Asian financial crisis, the BSP’s capital accounts amounted to $2.26 billion, equivalent to 3.3 percent of the gross domestic product (GDP).

In contrast, Indonedia’s CMA was capitalized at about one percent of their GDP and Malaysia at 1.4 percent. In the region, only Thailand’s CMA was significantly capitalized at 17.7 percent of its GDP.

"Even in 1998, the BSP compared favorably among its peers in developing countries," said a finance official. "It will probably be even better now if we looked at their net worth."

According to the DOF, the capitalization of the BSP would remain in the government’s proposed budget but its prioritization was likely to wait for a long time.

Under the New Central Bank Act of 1993, the NG is originally required to put down the entire P40 billion for the full capitalization of the BSP within two years of the effectivity of the law.

Sources at the BSP said that capitalization was continuously being discussed by the Monetary Board (MB) and the NG was regularly reminded of the provision of the law but the infusion is not aggressively pursued since the government was not in any position to comply.