PH awash with cash

12 May 2017

Tony Lopez

… It is not for lack of money that the government cannot institute drastic reforms and alleviate poverty. This government and this country are awash with cash. The economy is awash with cash.

Where is that money?  To start with, the savings rate is 30 percent of the value of output of goods and services or GDP.  GDP is P15 trillion.  So 30 percent of that is P4.5 trillion.   With that, we can finance the entire government’s operations for one year and still have P1 trillion of excess money.

We have $27 billion in annual OFW remittances. That’s P1.35 trillion.  It can finance the entire government infrastructure program in 2019.  The P1.35 trillion is 1.6x the infra budget of P847.2 billion this year. This P1.356 trillion is orphan money because nobody marshals it for productive purposes.  The P1.35 trillion thus is marooned inside elegant malls and in forests of condos where a square meter is overpriced at least five times its real value.

In addition, we earn $25 billion from our call centers and business process outsourcing (BPO).  That’s another P1.25 trillion.

Moreover, right at the central bank, private banks have parked P3 trillion of private deposits— money the banks are too lazy or too afraid to lend (because the BSP is a much better borrower and you talk to only one guy).  If the banks were to lend out the P3 trillion, they would have to employ entire bureaucracies—processing loan applications, interviewing loan applicants, visiting or assessing properties used as collateral, and holding so many meetings to approve the loans.

… Additionally, the Philippines has $81.8 billion in foreign reserves—money that can pay for importations for a year.  That’s another P4-trillion money.

So why do your bureaucrats keep courting credit rating agencies to get an investment grade credit rating?  We don’t need to borrow abroad.  We don’t even need foreign investments.

We have so much money locally.  So why does Duterte go around the world panhandling?  The Philippines is capital-surplus.  In fact, the country has been exporting capital, rather than importing, in the past 10 consecutive years.

Duterte has appointed a new central bank governor, Nestor Espenilla, 58.  He is an economist and a 36-year veteran at BSP. Our central bank is supposed to be among the world’s best. Outgoing BSP Governor Amando Tetangco Jr. has been cited world’s best no less than eight times.

So again I ask this:

If the Philippines is awash with so much money and our central bank is that good and (it is among the oldest central banks in Asia), how can you explain the fact that in Asean, with the possible exception of Indonesia, the Philippines has the highest inflation rate, the highest interest rates, the highest unemployment, the highest poverty incidence, and the lowest foreign investment inflow and the lowest ranking in Asean in Human Development Index or a measure of people’s well-being.

How come out of 1,500 towns, 600 towns  do not have a bank branch?  How come more than 60 million Filipinos do not have a bank account?

Amid so much liquidity (the techspeak for so much cash), how come 25 million Filipinos wallow in abject poverty?

Posted in banks, money, poverty

2 Responses to PH awash with cash

  1. May 13, 2017 at 7:07 am
    Gabriel Domingo

    This is super misleading. Just one — yeah, there must be billions of savings, but its not like this money is just sitting around, accessible by the government. Nope, this is used in “Investments”, defined generally.

    Indeed, one must look at the Current Account, and we see that it is in deficit, which means, however large savings is, our “investments” (again defined generally) far exceed domestic savings and is basically funded by foriegn “savings” (i.e. FDI, foreign debt, etc)

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