RP can draw up own economic program without IMF, says BSP

The Bangko Sentral ng Pilipinas (BSP) said the country is perfectly capable of drawing up its own economic program to achieve growth without supervision by any international agency, including the International Monetary Fund (IMF).

While the Philippines is no longer under any active IMF program it is still subject to the so-called post-program monitoring (PPM) review where progress on policy reforms are regularly assessed to ensure sustainability and continuity.

According to the BSP, however, the Philippines could technically let go of the PPM review and just be subject to the regular Article IV review applicable to all IMF members.

"We are capable of drawing up an economic program that we can implement,"said BSP Deputy Governor Amando Tetangco Jr.

By November this year, Tetangco said the country’s loan obligations with the IMF would be lower than the country’s annual contribution to the Fund for the first time since the Philippines came under IMF tutelage.

"Technically, we can let go of the PPM monitoring,"Tetangco replied when asked by reporters if the Philippines intended to finally let go of the IMF’s hand.

"What is really important is to have a sound economic program with or without international supervision," Tetangco said. "We are capable of that."

Although the country continues to support much of the policy reforms recommended by the IMF, relations have been increasingly strained over disagreements concerning tax reform priorities.

The IMF has been recommending increases in the tax rates to effect a net increase in revenue inflows outside of improvements attributable to administrative measures.

However, the government flatly rejected the proposal as politically unpalatable especially at a time when economic activity was slow and uncertainties hound the country’s export markets to the point where growth expectations have been tempered.

The IMF’s relationship with Philippine officials was not helped by the controversy over the ill-timed leakage of IMF data which had the net effect of jeopardizing a Philippine bond issue that ended up 25-basis points more expensive than it should have been.

This controversy forced the IMF to recall its mission head Joshua Felman who was implicated in the leakage and in his place was named former resident representative Sean Nolan as head of its Philippine mission.

Felman’s motives are unclear but local sources said the former IMF mission head had always been critical of the government‚s handling of its deficit problem and its resistance against the IMF’s recommendation to raise taxes as a step towards increasing revenues.

Since the Philippines emerged out of IMF tutelage, its relationship with its biggest creditor has become increasingly strained over the last few years with the Fund growing more pessimistic about the country’s prospects.

Its deficit estimates alone reflected its extreme pessimism as it projected that the country’s budget deficit could go up to as high as P262.88 billion, equivalent to 6.2 percent of gross domestic product (GDP) for the whole of 2003.

The IMF’s estimate was significantly higher than the official projections of the Arroyo administration which placed the deficit at P202 billion for 2003.