Budget Secretary is new BSP Chief

PHILIPPINES - In Brief 04 Mar 2019 by Romeo Bernardo

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In a surprise move, President Duterte last night decided that his budget Secretary, Benjamin Diokno, would be the best man to head the BSP. The Secretary is well regarded as an academic and technocrat whose field of expertise is public finance. Although untested in the area of banking and financial markets, he is importantly not seen as a politician, a good thing for preserving the BSP's independence. He will serve the remainder of former Governor Nestor Espenilla’s term, i.e., through July 2023.Secretary Diokno will take over the helm of the BSP at a particularly auspicious time. Not only is inflation falling and foreign reserves recovering, congress has just given the institution itself a new charter that strengthens its monetary management and banking supervision powers. While he would have leeway to steer the institution’s medium-term policy direction, expectations at this time are that he would continue the reforms started by his predecessors to strengthen monetary policy transmission and financial sector stability and achieve greater financial inclusion in this digital age. This early, financial markets are hanging on his every word. He has been quoted in the news saying, "BSP’s role is to ensure steady, strong growth. In order to achieve this, monetary policy has to be in sync with fiscal policy." Whether or not he had meant to signal a forthcoming interest rate cut is unclear. What is clear is that the new governor, who has been instrumental in solving government’s perennial underspending problem and raising the budget for infrastructure, has a bias for growth.Markets can be expected to be watchful of his early moves. A meeting of the Monetary Board is schedule...