WB worried over political crisis in RP

The World Bank called for urgent action yesterday to end the political crisis to prevent a further erosion of investor confidence.

Confidence in the Philippines has been rocked by political uncertainty, brought about by an impeachment motion by opposition parties against President Estrada.

The crisis has pushed the peso to record lows and the stock market to a two-year trough.

Vinay Bhargava, World Bank director for the Philippines, said corruption allegations against President Estrada are a "serious matter" that must be quickly resolved.

Bhargava said the World Bank also notes "with concern" that the country's budget deficit is well above the target for this year, and called on the government to reduce the gap so it can continue to draw on a World Bank loan package.

"It is now critical that action be taken to contain the fiscal deficit during the rest of 2000, and to include actions in the 2001 budget that will insure the budget deficit gets progressively smaller in line with the medium-term objective of a balanced budget," he said.

The budget deficit for this year has soared to P82.98 billion for the first nine months of the year, well above the government’s deficit ceiling of P62.5 billion for the full year.

The government this week withdrew plans to tap the last $310 million of the $1.4 billion International Monetary Fund (IMF) loan facility after the fund refused to allow the government to raise its budget deficit target.

With the loss of the IMF loan, a $600 million World Bank-Japan Bank for International Cooperation banking sector reform loan is also in jeopardy.

The country drew the first $200 million portion from the World Bank-Japan Bank loan in 1999, but local officials said yesterday the government is unlikely to receive the next portion this year after failing to meet loan conditions.

Bhargava said that based on the assessment of a World Bank mission which visited Manila this week, "good progress continues to be made in implementing the banking sector reforms."

However, one of the requirements for the release of the second portion of the World Bank loan is "maintenance of a sound macroeconomic framework" that includes fiscal, monetary and external policies targets.

Bhargava said the country may draw from the World Bank’s banking sector reform loan until June 2001 provided its fiscal position meets the targets set with the IMF.

He explained that World Bank’s conditionalities are separate from those of the IMF and that the World Bank conducts its own performance assessment of the government.

The government and the World Bank signed yesterday a $4.79 million loan agreement for a land administration and management project. – Marianne V. Go, AP