THE Philippines looks forward to a more meaningful role as a member of the 180-nation International Monetary Fund, having already made available 163.8 million in special drawing rights or SDRs under a currency exchange mechanism known among members as the Financial Transactions Plan or FTP.
SDRs represent a basket of currencies informally known as the currency of exchange at the IMF, equivalent in this case to $251.5 million.
According to the Bangko Sentral ng Pilipinas (BSP), the country’s continued membership at the FTP will pave the way for its admission to the new arrangements to borrow or NAB facility of the IMF.
The NAB seeks to help distressed countries or institutions with the potential to impair or unhinge the international monetary system.
“The participation in the NAB would be a significant step in strengthening international cooperation. This would also demonstrate the BSP’s strong commitment to global efforts to help address threats to the international monetary system,” BSP Gov. Amando M. Tetangco Jr. said on Tuesday.
According to Tetangco, the FTP to which the Philippines had been a participant since 2010, funds the loans and repayment operations of the IMF by using the foreign exchange resources of its financially strong members to support the needs of members with rather weak external sector finances.
The Philippines holds a creditor or reserve position in the IMF through its participation in the FTP, effectively becoming a net lender rather than net borrower since then.
Members with creditor positions at the IMF use their currency to provide financial assistance to other members and earn interest for their use and without actually relinquishing control over these resources as the monies remain an integral part of their foreign currency reserves or their gross international reserves (GIR).
“By virtue of their participation in the FTP, emerging market economies like the Philippines have joined international cooperation efforts to mitigate the spillover effects of Europe’s sovereign debt crisis by enhancing global financial safety nets,” Tetangco said.
The Philippines, after more or less 45 years of reliance on IMF support since its post-World War II founding, finally “graduated” in 2006 when then President Joseph Estrada was in Malacañang.
This was the year when the BSP paid all its IMF commitments well ahead of schedule and facilitated Manila’s exit from the Fund’s Post-Program Monitoring arrangement.
Tetangco said the Philippines has effectively reversed its boom-and-bust cycle of economic growth so typical of the country in the recent past and has strengthened its external payments position by posting a balance of payments surplus the past seven years.
Apart from its reserve position at the IMF, the Philippines is also a participant to the $120-billion Chiang Mai Initiative Multilateralization or CMIM facility which pools the foreign exchange reserves of members of the Association of South East Asian Nations plus the countries of China, Japan, Korea and Hong Kong.
This initiative promises to provide quick-release liquidity support to any member that suddenly finds itself starved of foreign exchange such as when member countries incur a balance of payments deficit.
The Philippines, Tetangco said, has made available $4.552 billion of its foreign exchange reserves to the CMIM.