BSP's SDA facility jumps 66.4% to P1.4 trillion in H1

MANILA, Philippines - Funds parked in the vault of the Bangko Sentral ng Pilipinas (BSP) in the form of special deposit accounts (SDAs) jumped 66.4 percent in the first half of the year as investors continued to search for high-yielding investment instruments due to the lack of major infrastructure and development projects in the country.

Latest data released by the BSP in its Second Quarter 2011 Inflation Report showed that placements in the SDA facility reached P1.388 trillion as of end-June or P554 billion higher than the P834.4 billion placed in the facility as of end-June last year.

The SDA facility consists of fixed-term deposits by banks and trust entities of banks and non-bank financial institutions with the BSP. It was introduced in November 1998 to enable the BSP to expand its toolkit in liquidity management.

In April 2007, the BSP expanded access to the SDA facility by allowing trust entities to deposit in the SDA facility in order to better manage liquidity in the face of strong foreign exchange inflows.

The BSP also reported that bank placements under the BSP’s reverse repurchase agreements (RRPs) that is also used to siphon off liquidity from the financial system went up 42.7 percent to P295.4 billion as of end-June from P188.4 billion in the same period last year.

 The central bank said RRP, which refers to the purchase of securities from the central bank with an agreement to sell them back at a fixed date, increased by P207 billion.

Last year, the BSP withdrew almost all the several liquidity enhancing measures introduced in November 2008 to cushion the impact of the global financial crisis on the domestic economy.

Crisis-related measures that were tweaked included the increase in the rate on a short-term lending facility to four percent from 3.5 percent, as well as the reduction of the peso rediscounting budget to P40 billion and further to pre-crisis level of P20 billion from P60 billion; the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument; and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points.

Earlier, BSP Governor Amando M. Tetangco Jr. encouraged banks to put into productive use SDA placements parked in the vault of the central bank to help sustain the country’s strong economic growth.

The idle funds, Tetangco explained, could be released to bankroll productive projects including infrastructure projects under the Aquino administration’s Public-Private Partnership (PPP) scheme.

The country’s gross domestic product (GDP) growth zoomed to its fastest pace in 34 years after expanding 7.6 percent last year, exceeding the revised GDP growth forecast of five-to-six percent set by the Cabinet-level Development Budget Coordination Committee (DBCC).

The Philippines was on the verge of recession after its GDP growth slackened to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

The DBCC sees the country’s GDP growing between seven to eight percent this year and next year.

As expected the country’s GDP growth slackened to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same quarter last year due to heavy underspending by the Aquino administration as well as weak global trade.