More loans, less infrastructure

Last Thursday night, the bicameral conference committee approved the final version of Bayanihan 2 or the Bayanihan to Recover as One Act, resolving among others the contentious provision involving P10 billion in funds for the tourism sector.

The issue involved the primary use of the P10 billion – whether to lend it to the tourism sector or to use it for tourism infrastructure.

Prior to the bicam version, the Senate version of Bayanihan 2 provided for a P10-billion loan facility for small and medium scale businesses severely affected by the pandemic, as well as funds for COVID-19 testing centers in major tourist destinations.

The House of Representatives, on the other hand, reallocated the P10 billion for tourism infrastructure development through the Tourism Infrastructure and Enterprise Zone Authority or TIEZA, formerly known as the Philippine Tourism Authority, an agency under the Department of Tourism.

As approved by the bicam, of the P10 billion appropriation for the tourism sector, P6 billion would be earmarked for soft loans for tourism micro, small, and medium enterprises (MSMEs) under the Department of Trade and Industry’s Small Business Corp.; P3 billion to the Department of Labor and Employment for displaced tourism workers; and only P1 billion for tourism infrastructure through the Department of Public Works and Highways.

Monetary authorities in East Asia Pacific said there is a need to continue close collaboration in the region to improve resilience against future shocks and maintain financial stability.

During the virtual 25th Executives’ Meeting of East Asia-Pacific (EMEAP) last Wednesday, central bank governors exchanged views on recent developments in the regional economy and financial systems amid the  COVID-19 pandemic.

Member central banks believe various policy responses in the region  helped  alleviate the economic fallout and financial market stresses  from the global health crisis.

Likewise, proactive communication between central banks and the various stakeholders, including public and industry players, also helped ensure smooth implementation of the policy responses.

Central bank governors also discussed how policy responses could be calibrated going forward  amid the high uncertainties surrounding the pandemic and taking into account the sustainability of these policies.

The Hong Kong Monetary Authority hosted the meeting which was attended by senior representatives from the International Monetary Fund (IMF) and the Bank for International Settlements (BIS).

Member central banks have been in frequent dialogues throughout the financial market stresses this year as the impact of the health crisis on the economy and financial markets has brought with it substantial policy challenges.

For one, the COVID-19 measures implemented by the Bangko Sentral ng Pilipinas (BSP) helped unleash P1.3 trillion in additional liquidity into the financial system to help jumpstart the  Philippine economy.

Members have responded with decisive policy action, which in some cases involved fundamental change to the way they pursue their mandates.

Central bank governors reaffirmed the importance of EMEAP as an effective platform for policy dialogues, strengthening regional cooperation and providing a regional perspective that informs and facilitates discussions at global forums during these challenging times.

In a study titled “Study on US dollar liquidity and funding dynamics in the EMEAP region,” the region experienced not only large capital outflows during the March-April episode of market stress but also sharp moves in foreign exchange swap rates and cross-currency basis swap rates.

The study highlighted that the macroeconomic adjustments undertaken after the Asian financial crisis in 1997 and 1998 as well as the Global financial crisis in 2008 and 2009 strengthened the resilience of many EMEAP economies.

“Nevertheless, pockets of vulnerabilities in certain jurisdictions and sectors indicate the importance for EMEAP members to continue their close collaboration to further improve their resilience against future shocks and maintain regional financial stability,” it said.