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.