By LEE C. CHIPONGIAN
MANILA, Philippines — Malacañang has informally granted approval for the Philippines’ proposed $500-million contribution to the International Monetary Fund's New Arrangements to Borrow (IMF-NAB) facility, signaling the country’s participation as a reserves-strong creditor with enough resources to provide supplementary funds to the IMF.
The $500-million contribution in the IMF’s currency or Special Drawing Rights is equivalent to SDR340 million, the credit floor requirement to join in the NAB.
A source said the proposed participation in the IMF lending facility has been given an unofficial nod from President Aquino. The central bank and the government are currently waiting for the IMF to complete its procedural process for the NAB.
In a statement last week, the BSP said that it hopes to soon join the IMF’s NAB which would allow it to be creditor or lender in an arrangement between the IMF and any IMF member countries or institutions coping with financial problems.
The Philippines is already a participant as creditor to the IMF’s Financial Transactions Plan and Use of Borrowed Resources since 2010. The BSP has contributed the maximum amount of $330 million, equivalent to SDR207 million and about $251.5 million have been accessed by borrowing countries including Ireland, Portugal and Greece.
In its proposal to join the NAB, the BSP in a report said it has the “financial capacity to join because of healthy GIR (gross international reserves).” The Philippines is one of the 13 emerging markets qualified to join. NAB currently has 26 member countries.
According to the BSP proposal, the NAB will enable the central bank to strengthen international cooperation with IMF members, especially in efforts to prevent financial crisis of a global scale. Member countries are usually represented by central banks.
Sources said the Department of Finance and the National Economic Development Authority have already given their support for the BSP’s $500 million contribution to the NAB.
The central bank in its study of the NAB said contributing $500 million, technically a loan to the IMF, will have no significant impact on the country’s reserves.
The BSP said all claims under the NAB will retain their full and immediate encashability in case of balance of payments need and it will be treated as reserve assets.
As for cost, the participation in the NAB involves a commitment to release reserves when a credit arrangement is required in the future. "There is no cash out for the BSP until credit arrangement is called, however, once called, the BSP is required to promptly provide resources to the IMF which can be in the form of a loan to the IMF," explains the BSP. Another way of releasing the funds, aside from it being a loan, is to buy IMF notes.
In 2006, the BSP prepaid all outstanding debt from the IMF amounting to $219.7 million, ending 45 years of IMF tutelage and the exit from its post-program monitoring arrangement.
The National Government's last arrangement with the IMF was in August 2000 with a loan of $783.23 million, mainly to supplement balance of payments which was in a deficit, and to aid in fiscal consolidation.