Manila 'came close to debt moratorium'

Manila 'came close to debt moratorium'

MANILA (Dow Jones): Philippine Central Bank Governor Rafael
Buenaventura said on Wednesday the country came close to
declaring a debt moratorium after foreign banks cut credit lines
last December while the leadership crisis was raging.

Buenaventura, speaking to the Foreign Correspondents'
Association, said disaster was only averted by the ouster of
former president Joseph Estrada on Jan. 20.

"Our access to credit had already been cut off in December
internationally by banks who were no longer willing to increase
their exposure in the Philippines because of fears that we would
have a violent transition," Buenaventura said.

The corruption allegations made by a provincial governor
against Estrada last October plunged the Philippines into its
worst financial crisis in decades and had a devastating impact on
Manila's financial markets.

"What do you do when your access to credit disappears? We had
maturing obligations in December," said Buenaventura.

Buenaventura said the bank was fortunate to have a buffer of
foreign reserves to meet - at least, for a time - its debt
payments unlike the situation during the debt crisis of 1983.

"In 1983 we had no reserves, we lasted one week and declared a
(debt payment) moratorium," said Buenaventura. "Eventually, that
could have happened to us too."

At the height of leadership crisis, the dollar surged to a
record 55.75 pesos on Jan. 17 - three days before Estrada was
stripped of his powers after mass street protests backed by
senior officials in the military and the police.

"If things hadn't worked out and the peso had a freefall to 90
pesos (to the dollar) they'd probably be burning my effigy," said
Buenaventura, adding that the bank resisted calls to massively
raise interest rates to stabilize the peso as this could have
badly damaged the economy.