I.
INTRODUCTION
Importance of Central Bank and Monetary Policies
According to International Monetary Fund(IMF), Central banks play a crucial role in managing
economic fluctuations and ensuring stable prices, aiming to keep inflation low and steady. They
achieve this through monetary policy, which involves adjusting the money supply, typically by
buying or selling securities. These actions influence short-term interest rates, which, in turn,
affect longer-term rates and economic activity. During crises like the 2007 financial crisis and
the COVID-19 pandemic, central banks have implemented various measures to ease monetary
policy, such as reducing interest rates and implementing unconventional policies like buying
long-term bonds. However, they also respond to challenges like growing inflation by tightening
monetary policy, often by raising interest rates.
Monetary policy is closely tied to a country's exchange rate regime, with flexible regimes
supporting effective inflation targeting. Additionally, the global financial crisis highlighted the
need for central banks to identify and manage risks to the entire financial system. Many central
banks have adopted macroprudential tools and frameworks to promote financial stability,
aiming to prevent disruptions to financial services and mitigate negative impacts on the
economy. Central banks are well-suited for this role due to their ability to analyze systemic risks
and their relative independence from political pressures and industry interests.
About the Banko Sentral ng Pilipinas
According to Eleanor S. Turaray, The Bangko Sentral ng Pilipinas (BSP), as the central monetary
authority of the Philippines, holds a crucial role in the country's financial system. While it
oversees the banking sector and financial institutions, its broader mission involves guiding the
nation's economic development. Collaborating closely with the government, BSP aims to
achieve economic and financial stability, ensuring that the Philippine peso maintains its
purchasing power. Despite its structural independence, BSP operates within the broader
governmental framework.
The primary goal of BSP is to maintain price stability, fostering balanced and sustainable
economic growth. To achieve this, it manages the expansion and contraction of monetary
aggregates. Understanding BSP's functions and responsibilities requires insight into the
Philippine financial system and current macroeconomic conditions, including past events like
the Asian financial crisis and BSP's responses to it.
The monetarist theory of economics will be used as a general framework to assess and evaluate
the major strategic monetary policies of BSP. Additionally, it will explore BSP's corporate
strategy regarding electronic payment systems, aiming to enhance its role as a financial advisor
to the government and facilitate economic development. The analysis will employ the strategic
alignment model of dynamic planning framework to assess the development, implementation,
and long-term benefits of these strategies, particularly focusing on the electronic funds transfer
instruction system's implementation and its impact on national cash management policies.
The integration of new technologies by BSP should not be viewed solely as operational
improvements but as a precursor to future advancements in the banking sector. As BSP leads
the country toward economic growth and development, the paper will explore the broader
implications of these technological advancements in shaping the financial industry's future
landscape.
II. Issues, Plans and Projects of Banko Sentral ng Pilipinas
Currency Management-The BSP has the exclusive power and authority to issue the
national currency. BSP’s notes and coins are issued against, and in amounts not exceeding, the assets
of the BSP. All notes and coins issued by the BSP are fully guaranteed by the government and are
considered legal tender for all private and public debts.
Inclusive Finance-In line with its strategic mandate to promote broad and convenient access
to high quality financial services and consider the interest of the general public, the BSP undertakes
various programs and policy initiatives aimed at enhancing financial inclusion, financial education,
and consumer empowerment.
Loans and Credit Operations-The BSP extends discounts, loans and advances to
banking institutions in order to influence the volume of credit consistent with objective of price
stability and maintenance of financial stability. It also grants loans or advances to banking
institutions in precarious financial condition or under serious financial pressures, subject to certain
conditions.
International Reserves Management-The BSP maintains a healthy level of
international reserves to provide liquidity support in times of volatility in the exchange rate and
balance of payments.
International Operations-The BSP’s mandate on international operations under the
purview of the International Operations Department is to support the promotion and maintenance of
price stability, external sustainability, and the integrity and value of the Philippine peso through the
effective management of external debt, foreign investments and other foreign exchange (FX)
transactions.
International Economic Cooperation-The BSP’s proactive engagement in various
regional and international fora significantly contributed to domestic policy formulation; assured
partners through established crisis prevention safety nets; broadened opportunities offered by
financial integration and cooperation agreements; and raised skills and knowledge through capacity
building initiatives.
III. Reaction
IV. Conclusion and Recommendation/Solution
Reference:
https://www.imf.org/en/About/Factsheets/Sheets/2023/monetary-policy-and-central-
banking#:~:text=Central%20banks%20use%20monetary%20policy,economies%20set
%20explicit%20inflation%20targets.
https://animorepository.dlsu.edu.ph/etd_masteral/3944/#:~:text=The%20Bangko%20Sentral
%20ng%20Pilipinas,direct%20the%20country%20to%20development
