An interview with the Central Bank Governor of the Year
In March 2019, faced with the untimely death of BSP Governor Nestor Espenilla, President Rodrigo Duterte made the surprise decision to move his budget secretary, Benjamin Diokno, to the BSP. At the time, we wrote: “The Secretary is well regarded as an academic and technocrat whose field of expertise is public finance. Although untested in the area of banking and financial markets, he is importantly not seen as a politician, a good thing for preserving the BSP's independence.” We also noted that “Secretary Diokno will take over the helm of the BSP at a particularly auspicious time. Not only are inflation falling and foreign reserves recovering, congress has just given the institution itself a new charter that strengthens its monetary management and banking supervision powers. While he would have leeway to steer the institution’s medium-term policy direction, expectations at this time are that he would continue the reforms started by his predecessors to strengthen monetary policy transmission and financial sector stability and achieve greater financial inclusion in this digital age.”
As it turned out, barely a year in office, Governor Diokno found himself and the BSP in unchartered territory, in the middle of a once-in-a-century pandemic, having to pursue unprecedented monetary policy stimulus and true to his early view, ensuring that “monetary policy has to be in sync with fiscal policy." Under his leadership, the BSP responded quickly with extraordinary measures to help cushion the pandemic’s impact on the Philippine economy. In recognition of his efforts to help stabilize the economy and stimulate growth, he was named by The Banker as “Global Central Bank Governor of the Year 2022,” a first for the Philippines.
As the Philippines enters its third pandemic year with the economy still performing below par, inflation still threatened by supply shocks, other central banks, notably the US Fed, preparing to tighten policy, and political uncertainty heightened by the May national elections, we asked to interview Governor Diokno, the only member of this administration’s economic team expected to still be around after the midyear change in government. Our questions and his answers, printed in full in this report, cover the BSP’s pandemic response, the direction of monetary policy and pandemic exit strategy, financial sector policies and other central bank concerns.
Mr. Diokno is Professor Emeritus of the University of the Philippines-Diliman, where he taught for over 40 years. His policy expertise and research contribution extend to various areas of public economics, and his experience in implementing reforms in the public sector is extensive, having served as Budget Undersecretary from 1986 to 1991 and Budget Secretary from 1998 to 2001 and again, from 2016 to 2019. As BSP Governor, besides pursuing the BSP mandates of price stability, financial stability, and efficient payments and settlements system, he also endeavors to bring central banking closer to the Filipino people. He is a champion of digital payments and financial inclusion. He tells us that he dreams of a cashless society, and reading about digitalization and the future of money to keep ahead of fast-changing developments is what keeps him up at night.
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