The Philippines’ long-standing relationship with the International Monetary Fund (IMF) has evolved from being a prolonged user of Fund resources to a stronger partnership marked by the country's contribution to collective efforts in preserving the stability of the international monetary system.
In 2010, the Philippines, through the Bangko Sentral ng Pilipinas (BSP), became a participant to the Financial Transactions Plan (FTP) of the IMF. The FTP is the mechanism by which the Fund finances its lending and repayment operations through a transfer of foreign exchange from members with strong external position to borrowing members. The Philippines holds a creditor (or reserve) position in the IMF through its participation in the Fund’s FTP.
A member is said to have a creditor position in the Fund when the latter has used the holdings of the member’s currency to provide financial assistance to other members. Such use of a member’s currency is remunerated, i.e., earns interest and continues to be part of the country’s international reserves.
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.
As of 31 December 2011, the Philippines has made available to the Fund through a currency exchange arrangement SDR163.8 million or about USD251.5 million*. More than half of these funds were disbursed by the IMF to European countries such as Ireland, Portugal and Greece in an effort to address the financial crisis impacting the European economic zone.
Most important, the country’s continued participation in the FTP will pave the way for the BSP’s admission in the New Arrangements to Borrow (NAB) facility of the IMF, a credit (lending) arrangement between the IMF and member countries or institutions which aims to forestall or cope with difficult situations that could impair 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.
The Philippines’ participation in the FTP marks a transition in the country’s relationship with the IMF. In 2006, the BSP prepaid all outstanding debt from the IMF which triggered the country’s early exit from its Post-Program Monitoring Arrangement and concluded the country’s use of IMF resources after nearly four and a half decades. The country has effectively reversed its bust and boom cycle of economic growth and has strengthened its external payments position. It has achieved balance of payments surplus in the last seven years. This strong external payments position paved the way for the Philippines' entry into the creditors' list among the Fund members.
In the region, the Philippines is also a contributor to the Chiang Mai Initiative Multilateralization (CMIM) facility, a US$120 billion regional pooling arrangement among ASEAN member states, China, Japan, Korea, and Hong Kong which aims to provide quick liquidity access in case of balance of payments difficulties. The Philippines, through the BSP, has a contribution commitment of US$4.552 billion to the CMIM, which is indicative of the country’s proactive involvement in international cooperation efforts to address future challenges.
*IMF official exchange rate USD1 = SDR0.651353 (as of 31 December 2011)