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IMF program exit okay but not yet timely – BSP |
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By LEE C. CHIPONGIAN
The Manila Bulletin 03/07/05 While politicians want the Philippines to exit the International Monetary Fund Post Program Monitoring, central bank officials said the government could, but now is not yet the time. "Let us first fix our fiscal problems by bringing in the reforms, implement them, then we can talk about exiting the PPM," Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura said. "Don’t count your chicks before they are hatched," he added. Albay Rep. Joey S. Salceda, chairman of the House committee on economic affairs made the call over the weekend to terminate the IMF-PPM for the Philippines. He argued that being branded as an "IMF failure" is affecting economic growth. The country has been under the tutelage of the IMF since it first took out loans to augment the country’s dollar stock in 1976. Buenaventura said getting out of the PPM would create no problems for the country. However, following several credit rating downgrades by Standard & Poor’s, Moody’s and Fitch Ratings – any "seal of good housekeeping" such as those from the IMF is positive news. "(An affirmation) will help us right now. In the meantime, let’s get our taxes first and plug our budget deficit before we go on a debate on what to do next," the BSP chief said. The three international credit rating agencies cut the country’s credit status and attached negative outlooks. This has made government borrowing more expensive. Salceda said it has become difficult to sell the country’s fiscal programs because of the IMF brand. "It is time we get out of it and tell the world that we’re ready to leave the PPM and implement our own fiscal program, which is our own initiative anyway," he told reporters Friday. After 23 IMF programs, the Philippines is still under the scrutiny of the IMF in the guise of global monetary cooperation and to advance financial stability. "We will remain a member of the IMF (but) let us move out of it. It has become a monkey on our back (the PPM) and we do not need it," Salceda said. Another BSP official explained that the PPM has no attached conditions and therefore, offers no harm to the country. "It is merely a policy dialogue with the IMF." As such, the PPM also carries no funding attachment. The PPM was supposed to be an exit program from the IMF but it is unlikely that the country will ever graduate from the PPM mantle, which has been extended for another year. Under the PPM framework, the government must accept a semi-annual visit from an IMF team, which will monitor fiscal and monetary performance, among others. The calls to exit the PPM came about because of the insistence of the IMF the Arroyo administration should target a budget deficit equivalent to 2.5 percent of gross domestic product for 2005, rather than the 3.5 percent to GDP ratio set by the Development Budget Coordination Committee. The IMF said instead of targeting a budget shortfall of P180 billion (or 3.5 percent to GDP) the government should aim lower or about P128 billion, or 2.5 percent of GDP as recommended by the multilateral funding agency. "An IMF prescription is a kiss of death," Salceda argued. "The PPM is really taking away the government’s flexibility in handling the fiscal problems." The Department of Finance explained to the IMF that while determining a more optimistic budget deficit is attractive to the government, the DBCC would like to adopt caution since there are pending issues, especially tax issues pending in Congress. These tax measures would make or break the deficit goal. The DOF said they are only "pragmatic" about the extent of the new legislation and if lawmakers would be able to deliver in the short-term, then better. "This is the reason why the projected NG (National Government) deficit is 3.5 percent rather than the 2.5 percent that the IMF recommended," the finance department said. The IMF has called the government’s fiscal program "interesting", but that what is really needed are bold measures to pull the economy out of the pits. Hence, the need for future monitoring programs to ensure that reforms are implemented to improve debt package and reduce deficit will continue. The IMF implied that the government had failed to make significant progress in adopting reforms to encourage confidence. Of particular interest to the IMF is the country’s burgeoning public debt, which continues to grow every year because of the government’s inability to straighten out tax administration. The IMF is an organization of 184 countries. |
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