PHILIPPINES CLIMBING OUT OF DEBT TRAP, SAYS PALACE OFFICIAL
MANILA, SEPTEMBER 4, 2006 (STAR) Trapped in a back-breaking debt regime for years, the Philippines is finally well on the way out of the hole and heading toward an era of balanced budget in less than three years, Malacañang said Monday.
The upbeat declaration followed the decision of President Gloria Arroyo's senior economic official to exit from the no-loan arrangement with the International Monetary Fund (IMF) amid growing confidence in the sustainability of the government’s successes in the fiscal front.
"We are on the road to a debt-free Philippines, on top of a balanced budget by 2008, when we shall be able to reduce our debt payments by half," Press Secretary Ignacio R. Bunye said.
Finance Secretary Margarito Teves said an official statement on the decision not to renew the no-loan arrangement with IMF was forthcoming, but he strongly indicated that "that’s the direction we’re going."
The Philippines forged the no-loan accord with IMF in 2000 in the wake of the government’s failure to meet the requirements of a banking sector reform loan.
Bunye hailed the country’s impending exit from the IMF, saying it will "pace our economic takeoff. We are on the right track with our political stability and economic strength and we are winning back the world through solid reforms having a meaningful payback to the Filipino people."
He added that the fiscal surpluses generated over the past months, coupled with the strengthening of the peso against foreign currencies, "lead the momentum of gains that are fueling investments, jobs and infrastructure."
With less and less funds going to debt payments, more and more money would be invested in basic services and other needs of the people, he stressed.
BSP won’t intervene in forex market By Des Ferriols The Philippine Star 09/04/2006
Monetary officials said the Bangko Sentral ng Pilipinas (BSP) will not support the exchange rate at any level and intervene only if volatility should go beyond acceptable range.
Analysts are expecting the peso to test the 50.50-to-$1- level this week due to the steady inflow of portfolio investments into the equities market as well as the continuing surge of remittances from overseas Filipino workers (OFWs).
But the BSP maintained that the impact of a strong peso should ultimately level out even for exporters whose exports normally experience sudden and immediate drops in competitiveness as markets adjust to stronger exchange rates.
BSP Governor Amando M. Tetangco Jr. said over the weekend that the appreciation of the peso against the dollar only looked damaging when taken in isolation.
When compared to the rest of the region, however, Tetangco said the peso was in sync with the currencies in economies considered as the country’s closest competitors.
According to Tetangco, the peso has appreciated by 4.6 percent from the beginning of the year to present. In comparison, the Thai baht has appreciated by 9.3 percent and the Indonesia rupiah by 8.3 percent.
The Korean won, on the other hand, rose by 5.1 percent and the Singapore dollar went up by 5.8 percent against the dollar.
"This means that relative competitiveness is more or less the same since everyone is moving in generally the same direction," he pointed out.
According to BSP Deputy Governor Diwa Guiniundo, on the other hand, the effects of a strong peso would eventually level out, with exporters ultimately getting the benefit of cheaper imported materials as well as cheaper fuel costs.
Guinigundo said the BSP was avoiding excessive volatility since it would disrupt business much more permanently.
"If the peso is very volatile, people will not be able to plan and that is much worse than just the short-term impact of appreciation or depreciation," he said.
At present, Guinigundo said the government is still using the 51-53 to $1 budgetary assumption and although the peso has already appreciated past the 51 level, he said the ideal situation was for the peso to go wherever it wanted to go "in an orderly fashion."
"Sudden and dramatic fluctuations are never good," Guinigundo said.
"That’s what our mandate requires us to do–to make sure that doesn’t happen. It isn’t to support the exchange rate at any level."
Chief News Editor: Sol Jose Vanzi
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