Arroyo calls for unity to solve crisis

Arroyo calls for unity to solve crisis

Associated Press, Manila, Philippines

President Gloria Macapagal Arroyo called for national unity on Thursday as she sounded the alarm on a "grave economic crisis" in the Philippines, which is battling a burgeoning fiscal deficit.

Arroyo said the deficit - 111 billion pesos (US$1.98 billion; euro 1.61 billion) in the first eight months of this year - was the result of "incessant borrowings" in lieu of raising revenues in past years, resulting in interest payments growing from 28 percent of the national budget in 1992 to 32 percent this year.

"We can beat the odds even as our nation faces the threat of a grave economic crisis ... if we act on time and in tandem," she said. "Our national survival rests on whatever patriotic consensus we can build."

She said the national government was also "saddled" with financial obligations to local governments, whose share of the revenue allotments more than doubled from 7 percent in 1992 to 16 percent in 2004.

The interest payments plus the revenue allocations have left only 6 percent of the national budget for crucial infrastructure, the president said.

She said the Philippines is losing more to debt payments faster than it is able to raise revenues, leaving the country with an external debt-to-gross domestic product ratio of 71 percent - the third highest in Asia - and a revenue-to-GDP ratio of 14 percent, the region's second lowest.

Arroyo urged legislators to support revenue measures to raise 80 billion pesos ($1.43 billion, euro 1.16 billion), including one that increases the "sin tax" on products such as cigarettes and alcohol.

She has already decreed several austerity measures, including energy-saving in government offices and pay cuts for government corporation officers.

She has given two months for the Bureau of Customs to crack down on smugglers, and for the Bureau of Internal Revenue to garnish bank accounts of "notorious" tax evaders.