RP must complete reform process: IMF

RP must complete reform process: IMF

MANILA (Reuter): The Philippines' continued economic recovery depends on the completion of vital reforms as well as "blood, sweat and tears", the International Monetary Fund's (IMF) local representative said yesterday.

Howard Handy, leaving the Philippines shortly after a two-year stint here, told a news conference the recovery program had so far been very successful.

But he added: "We are all convinced that the success of the Philippine program and the sustainability of the recent recovery really hinges on the full implementation on a timely basis of the reforms the government has already put on the table."

These include reforms to end widespread tax evasion and to expand the number of taxpayers, currently only a fraction of the workforce.

They also include tariff reductions and the full liberalization of the energy sector.

"It's not enough to just talk the growth rate up. You've got to get the elements for growth securely in place. Those elements involve blood, sweat and tears," Handy said.

He said the proceeds of privatization had so far helped the government over the initial phases of its reforms, which include the liberalization of foreign exchange, banking and telecommunications.

But selling off state enterprises could not go on for ever and concrete reforms have to be in place, he said.

"We are buying time with the privatization for the implementation of long-lasting tax and expenditure reforms. That time is precious. It must not be wasted," he said.

Handy said a sharp increase in annual inflation in September was caused by an unexpected rice price rise and did not reflect laxity in monetary policy.

The government, however, would probably not be able to meet its 6.5 to 7.5 percent full year inflation target although he said the final result would still be below double figures.

Philippine annual inflation rose sharply to 11.8 percent in September from 8.4 percent the previous month, mainly because of a rice shortage.

Handy said gross national product growth would remain strong at around six percent in 1995 and the current account deficit would continue to decline.

He said the overall balance of payments surplus would be around $1.5 billion by year end against $1.1 billion last year.

And he said prospects were good for the Philippines, long dependent on foreign assistance to keep its economy afloat, to be able to "exit" from its current IMF program when it expires in 1997.

The IMF program involves some $684 million in loans, not all of which will be taken up, according to government officials.