IMF monitoring no longer necessary — Buenaventura

The Bangko Sentral ng Pilipinas (BSP) said it is no longer necessary for the Philippines to go through any post-program monitoring by the International Monetary Fund (IMF) as its borrowing level dipped below its annual contribution to the fund.

BSP Governor Rafael Buenaventura told reporters that the government does not intend to request for an extension of the IMF’s post program monitoring (PPM) when it expires in September this year.

"We don’t intend to borrow from the IMF anyway and the level of our borrowing has been below the amount that we contribute every year," Buenaventura said. "So we don’t need to be under the PPM anymore."

Buenaventura said IMF’s tutelage is even less useful now since the PPM did not qualify as a trigger for any facility that would otherwise be available to the Philippines if it were a huge IMF borrower.

"The only reason we wanted the PPM was because we thought it would qualify as a trigger for the currency swap program under the Chang Mai agreement," Buenaventura said.

Under the Chang Mai agreement, Asian countries are allowed to have 100 percent access to the currency swap facility that is intended to ensure the stability of regional currencies.

To qualify, however, the borrower country should be under an IMF program which the Chang Mai initiative considers as a seal of good housekeeping on the assumption that the IMF could ensure the continuity of financial reforms.

"We thought that since we are no longer under any IMF program, the PPM could qualify as a substitute trigger for the currency swap facility," Buenaventura said. "But since it’s not, we don’t need it anymore."

Without the IMF seal, the Philippines could only access 10 percent of the Chang Mai currency swap facility.

"Being out of the IMF monitoring would actually save us more because we won’t have to spend on the IMF missions that have to come here twice a year," Buenaventura pointed out. "So the only IMF review that we have to prepare for is the annual Article 4 review which is standard for all IMF members."

Buenaventura pointed out that the country is already being monitored closely by various international ratings agencies that frequently visit the Philippines and scrutinize its economic performance.

"We will accommodate all existing ratings agencies. Their monitoring is just as thorough as the IMF and we are more than willing to cooperate," he said.

Last year, the Philippines closed a bilateral currency swap with China for $3 billion. Another currency swap also for $3 billion was concluded with Japan.

The swaps were part of the Chang Mai Initiative where ASEAN countries together with Japan, China and Korea had agreed to forge as many bilateral agreements as possible to ensure that regional currencies would remain stable.

The Chang Mai Initiative called for a comprehensive regional financing facility that would prevent future financial crises from spiraling out of control the way they did in 1997 while Asian countries stood back with no game plan with which to handle the aftermath.

Under the Chang Mai Initiative, any country could access only up to 10 percent of the entire credit line in time of emergencies. For the facility to be 100 percent available, the country has to be under an approved loan from the IMF. – Des Ferriols