Asian crisis spoils RP's exit from IMF tutelage

Asian crisis spoils RP's exit from IMF tutelage

MANILA (AFP): The Philippines completed its final International Monetary Fund (IMF) program on Friday, but quickly entered into a "precautionary arrangement" because of the Asian financial crisis, officials said Saturday.

Completion of the program called the Extended Fund Facility, which started in 1994, technically marks the Philippines' exit from 36 years of IMF supervision.

With the successful review, the Philippines will draw the final tranche of the program totaling US$331.4 million plus a parallel financing from the Japan Export-Import Bank to boost international reserves, a presidential palace statement said.

It said the IMF board meeting in Washington on Friday "approved the completion of the final review of the program" which officials have said will be the last under the IMF.

Completion of the program came after the Philippines met all the IMF requirements for a successful review such as the passage by Congress of a sweeping tax reform law and the deregulation of the oil industry.

The Philippines was supposed to bow out of the current program in June 1997 but delay in the passage of the two vital laws forced Manila to defer it.

"This is what we've been waiting for and what we've been working for during the last three years," Central Bank of the Philippines governor Gabriel Singson told reporters.

"This will give the international community more confidence on the Philippines."

However, news of the review completion was tempered by Manila's move to enter into a precautionary arrangement for a standby facility with the IMF effective April 1. The IMF also approved the new program on Friday.

The palace statement and Singson avoided using the word "exit", choosing instead to stick to the phrase "completion of the final review of the program. "

The new two-year precautionary program will allow the country access to a 1.371 billion-dollar standby fund from the IMF in case of an emergency, the statement said.

Manila will tap the standby facility "only when it is necessary and that depends on us," Singson said.

The program however will bind the country to fiscal and monetary targets set by the IMF, officials admitted.

Singson said he will travel to Washington on May 8 "to discuss with the IMF some details of the program" and an IMF team will arrive in Manila later that month to conduct the first review under the new program.

He said the next government taking over after presidential elections in May can review the terms.

Under the precautionary program, the Philippines committed to the IMF a gross national product (GNP) growth target of three percent this year, 4 to 5 percent in 1999 and 6 percent in 2000.

Average inflation rate was set at 7.5 percent in 1998, 8.5 percent in 1999, six to seven percent in 2000 and five percent after that. It also pledged to reduce external current account deficit to 3.1 percent of GNP and increase international reserves to around two months of imports.

The new program aims to "restore confidence in the peso and contain the impact of the Asian crisis on the economy," the statement said.

The Philippines entered its first program in April 1962 and had 22 programs since then.