Arroyo allies back $1-B loan to IMF-A A +A
Thursday, June 28, 2012
MANILA -- Allies of detained former President Gloria Macapagal-Arroyo in the House of Representatives support Bangko Sentral ng Pilipinas’ (BSP) move to commit $1 billion of the country's dollar reserves to the International Monetary Fund (IMF).
The Philippines is a member of the IMF, which uses the contributions from its members to provide loans to countries going through financial difficulties to minimize its adverse impact on their people.
House Minority Leader Danilo Suarez said although the $1-billion loan has raised a lot of understandable concern, the BSP was only implementing a standard banking practice.
"We are in favor (of it). We have nothing against in placing that money to IMF," Suarez told reporters in a press conference Wednesday.
For nearly 40 years until 2006, the Philippines itself was a net borrower from the IMF, said BSP Governor Amando Tetangco Jr.
The Philippines fully paid its loans to IMF in December 2006 as the implementation of continuing reforms have made the local economy stronger, Tetangco added.
He said the country's economic fundamentals are now sound, the local banks are able to meet domestic credit needs, and the central bank is capable of lending $1 billion from its international reserves to the IMF.
"Such a loan will not reduce our international reserves; only reallocate them from investments into loans. Most important, the BSP is required by law to invest the country's reserves only in foreign-denominated assets," Suarez said.
He, however, took a swipe at the administration of President Benigno Aquino III which, he said, has no right to claim to be a "financial genius" behind the move.
"It was the administration of President Arroyo that was able to prepay in full our debts to the IMF in 2006, turning us from a net debtor to net creditor," the senior lawmaker said.
Meanwhile, contrary to an earlier statement of Senator Ralph Recto, the former President said the BSP is granted independence by law to lend the country's dollar reserves.
Recto earlier said that as a creation of Congress, the BSP could not claim sole proprietary rights over the country's dollar reserves and should seek consensus first or secure appropriation cover from Congress.
"I'm not totally opposing it but how can the government, through the BSP, lend money to IMF without authority from Congress?" the senator asked.
But according to Suarez, Arroyo, who is currently detained for electoral sabotage charges, told him that the BSP is "not a constitutional body but it has its independence by law."
Bayan Muna party-list Representative Teddy Casino, meanwhile, called for changes in the BSP charter to prohibit the President and other finance officials from lending public funds to foreign banks and financial institutions, including the IMF, to the prejudice and detriment of local enterprises.
Calling the plan a "harebrained idea," Casiño said the .3 percent interest to be earned from the IMF loan is miniscule compared to rates normally lent to local enterprises, government agencies or local government units.
He said amending the BSP Charter will make it "more responsive to the needs of the local economy."
"As it is, our finance officials borrow and lend money without even consulting Congress who eventually is left holding the bag. This should stop. This is public money and the people should have a say how it is to be used," Casino said. (Kathrina Alvarez/Sunnex)