Philippines lends cash to help crisis-hit euro zone

The BSP said that due to globalisation, the crisis in the West has potential to spill over to Asia and the Philippines. Hence, contributing to global efforts to help stem the problem in the euro zone was a prudent act.

“The BSP signalled its support to the IMF’s efforts in raising resources to strengthen European firewalls, help stem potential contagion and secure global and economic stability,” the central bank said in a report.

Being a member of the IMF, the Philippines contributes to the organisation’s pool of financial resources, which are tapped to help countries dealing with foreign exchange-liquidity problems. Countries in need of funds can borrow from the IMF, particularly through its Financial Transactions Plan (FTP) and New Arrangements to Borrow (NAB) facilities.

According to BSP, of the total loans extended by the IMF under the FTP, $286.4 million were contributions from the Philippines. Out of the total loans extended by the organisation under the NAB, $62 million also came from the Philippines.

“More than half of the funds [from the Philippines] were disbursed to countries such as Portugal, Ireland and Greece in an effort to address the crisis,” the BSP said.

On top of funds from the Philip-pines that the IMF already disbursed in 2012, the country has  pledged an additional $1 billion to the international lender to further beef up its resources to help resolve the euro-zone crisis. The IMF will draw on the amount should the need arises.

Meantime, the Philippines has enjoyed growing foreign exchange reserves, which now stand at $84 billion. The build-up of reserves was credited largely to remittances from expat Filipinos, foreign investments in the business process outsourcing sector and foreign portfolio investments.