IMF backs GMA economic program

The International Monetary Fund (IMF) expressed its confidence yesterday in President Arroyo’s economic program, but voiced apprehension over falling tax revenues.

IMF officials said the administration has to improve its tax collection so it can meet its P130-billion budget deficit target this year.

At the same time, they expressed hope that senators would break their stalemate soon so that legislation that could unlock billions of dollars in potential investments could be passed.

Joshua Felman, the Fund’s division chief for the Asia-Pacific region, and Sean Nolan, senior resident representative, made known their views about recent events in a wide-ranging discussion with Speaker Jose de Venecia Jr.

They were joined in their call on the Speaker by Bas Bakker and Christoph Duenwald, senior IMF economists.

De Venecia said the country is no longer under any IMF program since it is no longer availing itself of any loan from the Fund.

He said the call on him of the IMF officials is part of "post program" consultations.

The Fund’s representatives were alarmed by falling tax revenues. Collections of the Bureau of Internal Revenue for the first five months of this year dipped by more than 20 percent, the biggest fall in recent years.

Budget and finance officials have announced that the administration will have to cut its expenditures so the government can operate within its budget deficit target.

The IMF officials said the approval of the Special Purpose Asset Vehicles (SPAV) bill is "absolutely essential" in solving the banking system’s problem about its P600-billion non-performing loans and other idle assets.

The measure will put new money into the system and lead to the reopening of factories and the rehiring of their work force, said De Venecia.

The SPAV bill, when enacted, is expected to bring in about $5 billion in investments, at least $2 billion of which has already been committed.

The Speaker acknowledged that there is a serious problem in tax collection, saying "there is a need to maximize executive action to meet our fiscal targets."

"We have to work double time to reduce the budget deficit," he said.

The House is largely not in a mood to improve new taxes to narrow that deficit. What it is inclined to do is to streamline the present system of tax collection.