We have stability

A central bank is a linchpin of stability for a country and its economy. You don’t play politics with it, and you certainly don’t put a politician in charge of it.

In 2017, Duterte didn’t. He made the well-applauded appointment of the deputy governor. Stability was assured, so was continuity, and Nesting Espenilla delivered. When inflation rose, he increased interest rates; the flow of money slowed, demand softened, prices stabilized. Some said he moved too slowly, but caution is the hallmark of a good central banker—you move after careful reflection.

Subsequent events proved it a wise course. Inflation is now on the way down to within the government’s 2- to 4-percent range. He also broke new ground in the Philippine quest for greater financial inclusion and capital market development, and improved the resilience of the banking system in facing new challenges coming from increased global economic and financial integration and disruptive technology.

He left us after a too short but illustrious career. And left the Philippines in a stable monetary condition with a sound banking system.

We’ll miss him.

On to the stage comes Ben Diokno, a surprising choice, as the “tsismis” on who’s next didn’t even have him in the picture at all. But it’s a clever choice of the President. We are, as some of my recent columns highlighted, on the cusp of a digital revolution few are recognizing, and even fewer are doing much about.

Ben brings an outsider’s view and a new way of thinking the central bank will need as we digitize the world — and particularly banks. His introduction of cash-based budgeting at the Department of Budget and Management, and helping solve the protracted underspending of government, suggests this needed ability to think outside the box. And his fight with Congress shows he’s prepared to stand up strongly to protect his position despite high-level opposition — an essential characteristic of a central banker.

He’s likely to make the Bangko Sentral ng Pilipinas (BSP) less isolated but no less independent, and one that works closely with the fiscal side of the economy. He and the finance secretary get along well. Ben has already stated that “BSP’s role is to ensure steady, strong growth. In order to achieve this, monetary policy has to be in sync with fiscal policy.”

In a reflexive reaction, markets fell, but on reflection quickly recovered to their pre-Diokno level, indicating true confidence in him.

On the recent accusations against him, as I said in a blog at the height of the controversy over him: “I’ve known Ben Diokno for many years and I’ve never seen a whiff of corruption. I’d be very surprised if he was involved in some sort of anomaly. It would be better if the House first inquire, not immediately attack. That’s hardly fair for any person. And surely there’s no sufficient evidence yet to call for him to be fired. The President is quite right to reject it.”

If those in Congress still feel there was misdoing, I hope they just quietly look into it more closely, and only bring it forward if they can find more conclusive proof of wrongdoing.

And what is the House of Representatives up to? For the first time in nine years, we have a delayed budget. Earlier, Finance Secretary Carlos Dominguez III said that the reenactment of the 2018 national budget is costing the government about half a billion pesos a day. Here we are mid-March, so even just a first-quarter delay won’t be all it is. Dominguez estimates the government couldn’t implement about P46 billion worth of public infrastructure in the first quarter due to budget reenactment. It will move into April, as the House has recalled the bicameral-approved budget for further review. An unheard of action, an action that is not representing the people.

When the President gets to sign it, let’s hope he vetoes these last-minute revisions. Whatever the rights and wrongs of the case, the delay is causing too much damage to our economy. Congress must stop it and send the budget in the form the bicameral committee agreed to print—today!

The ever so much needed infrastructure push this government has made as one of its fundamental programs has already been delayed for at least four months. It could well extend through the whole of the first half if Congress doesn’t stop this now. The budget has been delayed at the worst time, when the weather is ideal for uninterrupted construction. Soon the rains will come, resulting in delays that shouldn’t have occurred. The damage to the infrastructure program is immense.

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