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.