Unconventional monetary policy to fight covid-19

PHILIPPINES - In Brief 23 Mar 2020 by Romeo Bernardo

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The Monetary Board approved today the purchase of P300 billion of government securities under a repurchase agreement with the Bureau of the Treasury (BTr). In a statement, BSP Governor Benjamin Diokno said the additional liquidity is “intended to provide support for those most affected by the enhanced community quarantine (ECQ), especially in Luzon, for the next 60-90 days.” The new measure comes on the heels of last week’s monetary accommodation, a package that included a 50bp cut in policy rates, reduced interest rate on its refinancing facility and certain time-bound regulatory forbearance for banks. It also comes alongside a proposal from the executive to congress seeking more powers for the President to address the country’s needs under the declared state of national emergency. We expect that the proposal, with a few tweaks, will pass congress which is currently holding a special session. Apart from enabling the national government to quickly respond to the needs especially of the health sector, the bill, if passed, would allow the President to realign or re-allocate funds in the national budget to programs and activities related to stemming the spread and transmission of covid-19 as well as mitigate the impact of the lockdown on households who have no means of supporting themselves in the interim. This will give government the wherewithal to maximally use fiscal policy to counter the adverse impact of the crisis, including providing subsidies to families and quickly extending low-cost credit to businesses.Over the weekend, several more business and civil society groups have called for bolder and more massive fiscal stimulus “to mitigate the suffering of Filipinos...