IMF exit program hinges on budget performance

Keeping the government’s budget deficit within set targets will be crucial to a planned exit program with the International Monetary Fund (IMF).

Bangko Sentral ng Pilipinas Governor (BSP) Rafael Buenaventura who, along with officials of the Development and Budget Coordinating Council (DBCC) led by Finance Secretary Alberto Romulo met over the weekend to discuss government’s financial health, said one of the key issues they discussed was whether government is capable of pursuing a post program monitoring with the IMF.

In an earlier interview, Buenaventura said the Arroyo administration will earn the confidence of foreign investors and creditors should it decide to carry out the plan of the previous administration to implement a post program monitoring with the IMF.

Buenaventura said an IMF mission will be in Manila in mid-February to assess the country’s state of affairs, especially on the economic front, following the transfer of political power from deposed President Joseph Estrada to President Arroyo.

"Definitely the level of budget deficit will be crucial in deciding whether an exit program and a post program monitoring can be done," Buenaventura said.

Over the weekend, the DBCC agreed to keep this year’s budget deficit to a maximum of P145 billion, vowing to improve revenue collection and implement tax measures to make that a worst-case scenario of a P225-billion deficit is avoided.

Budget and Management Secretary Emilia Boncodin said government will have to resort to borrowing and tap official development assistance (ODA) to cover government’s financing requirements.

Boncodin said government will review and assess the disbursement last year of ODAs which was slow. Out of the available ODA of $1.2 billion in 2000, government was able to draw less than $700 million.

"We are going to look at the problem areas and see what can be improved and done to speed up the disbursement of the ODAs," Boncodin said.

Under the post program monitoring, the IMF will assess the country’s economic performance on a periodic basis, basically comparing actual figures with set targets. This is normally done after a member-country completes an exit program with the Fund.

The monitoring is conducted to assure international investors and creditors the country will continue to implement agreed upon fiscal and monetary reforms and policies. These include ensuring local and foreign loans are paid under the signed schedules.

The Arroyo administration has set its economic targets for this year, including a gross national product growth of four to 4.5 percent, gross domestic product growth of 3.8 to 4.3 percent, inflaton rate to six to seven percent and a budget deficit that will not exceed P145 billion.

The Arroyo government needs to watch its budget deficit since this will be critical in completing government’s exit program with the IMF. The previous administration failed to keep up with its end of the deal, thus, it was forced to abandon the exit program even before this lapsed in December last year.

The Estrada administration pledged to keep its deficit at just P62.5 billion but this swelled to P136.1 billion. As a result, the IMF withheld the remainder of a $1.2-billion standby loan.– Rocel Felix