Senator: $1-B loan to IMF lacks Congress blessing

BEING a creation of Congress, the Bangko Sentral ng Pilipinas (BSP) should not lend $1 billion to the International Monetary Fund (IMF) as part of an initiative to rehabilitate debt-ridden economies in Europe, a senator said Tuesday.

Senator Ralph Recto said BSP's Congress-enacted mandate is affirmed by the P40-billion infusion approved by Congress for its recapitalization when it repudiated its old self, P20 billion of which had already been appropriated in the past national budgets.

Debunking Recto's view, BSP Deputy Governor Diwa Gunigundo said the New Central Bank (Republic Act 7653) passed by Congress authorizes the agency to do so.

Section 75 of the said law states that the Monetary Board may authorize the BSP to grant loans to and receive loans from foreign banks and other foreign or international entities, both public and private.

The BSP may also "engage in such other operations with these entities as are in the national interest and are appropriate to its character as a central bank. The Bangko Sentral may also act as agent or correspondent or such entities."

"The BSP charter authorizes us to lend to IMF in the context of our responsibility to manage our international reserves," Gunigundo told Sun.Star.

Recto said the people must also be made to understand why the government is lending out to IMF while the money could be better used to bankroll projects such as school buildings, hospitals and other key infrastructures.

Doing so, Gunigundo said, would be a violation of the law as he asked camps opposed to the loan to get necessary information from the BSP.

"International reserve assets are claimed on non-residents. Thus, we cannot use the reserves to lend out to both the Philippine public and private sectors. Reserves can only be used on obtaining foreign-dominated assets issued by non-residents," the BSP official said.

The country's international reserves stood at $76 billion in May.

Recto said the country would not be judged on how it helped the troubled European economies, but on how it exercised fiscal maturity to achieve long-term growth and spared itself from possible debt crisis.

Presidential spokesperson Edwin Lacierda said the Palace respects Recto's opinion but leave the matter to the BSP.

"I think the fact is the BSP has already committed to loan $1-billion to IMF. They can ask BSP the reason for doing so," said Lacierda.

Not a waste of money

Lacierda maintained that BSP's decision to loan $1 billion to the IMF is "not a waste of money" and it is meant to help a fellow country in need.

"We are not wasting the money. It's a loan. IMF would pay us back the loan. Non-monetarily, it's going to help us because it's going to help the economy of Europe," the Palace spokesperson said.

Lacierda said it was the country's interest to help a sizeable number of overseas Filipino workers (OFWs) who work and live in Europe.

He added the OFWs would be adversely affected should the economy of the country they work and live in continues to slowdown.

"It's in our interest to protect—to help those economies because we have a substantial number of Filipinos there," Lacierda said.

"What if we lose our OFWs in Europe because they will be sent home due to lack of jobs in Spain, in Italy," he added.

Asked if the Palace agree with the proposed resolution in the Congress to investigate the loan, he said "we cannot stop them from investigating."

'Arrogant pretension'

Several lawmakers and groups criticized the government's move to lend money to IMF.

The Freedom from Debt Coalition (FDC) described the BSP's move as "arrogant pretension of a country very much in debt."

The group held a protest action outside the BSP building in Quezon City to voice their concerns to the government.

FDC members lambasted the government for "being fast in allowing the IMF to manage our money, yet being slow in allocating funds for basic social and economic services."

"With this US$1-billion pledge, the government is in effect flaunting the liquidity of its coffers and seeking higher credit rating from Fitch, Standard & Poor and Moody’s," the group said.

FDC president Ricardo Reyes also questioned why the Philippines granted the loan to IMF, which they say would only be used to "prolong its life and even expand its exploitative operations."

FDC also warned the government of the "true" intent of the fund the IMF is raising, saying that "it is not the people of Greece, Spain or Ireland the IMF is bailing out, but the irresponsible private banks that made loans to these countries."

Reyes cited reports that German and French private banks hold some 70 percent of Greece's $400 billion debt. (Jill Beltran/Virgil Lopez/Sunnex)