Despite SARS, IMF to send mission to RP

Despite the SARS scare, the International Monetary Fund (IMF) has decided to send its mission to the Philippines for the post-program monitoring (PPM) review on Monday.

The IMF announced yesterday that the mission, to be headed by senior IMF adviser Masahiko Takeda, will conduct the annual review along with former IMF resident representative Sean Nolan who was earlier named as the replacement for former head of mission Joshua Felman.

Felman was removed as head of mission following the controversy over the ill-timed release of some IMF data that adversely affected a Philippine bond float last year.

The government launched an aggressive lobby against Felman, leading to his removal and Nolan’s appointment as acting head of mission pending the appointment of a more permanent head of the IMF’s Philippine mission.

IMF resident representative Vikram Haksar said Nolan would still be part of the mission but he declined to say whether he would be arriving along with Takeda.

The IMF had earlier sent feelers that it would have to postpone its mission due to the widening epidemic of Severe Acute Respiratory Syndrome (SARS) in Asia.

Haksar declined to reveal more details about the mission, saying only that the IMF would be coming out with an official release within a couple of days.

According to a top finance official, on the other hand, the mission would be discussing the country’s overall economic performance and the fiscal position of the Arroyo administration would be central to the talks.

Although the government’s revenue performance has been better than expected for the first quarter of the year, the official said there are still concerns about the huge funding requirement of the National Power Corp. (Napocor ) which could bloat the government’s contingent liabilities.

Officials added that aside from the fact that the financial market has tightened somewhat since the Middle East war broke out, perception is also being affected by the recent downgrading of the country’s credit rating by the New York-based Standard & Poor’ s.

"We are somewhat more confident now that the shortfall of the Bureau of Internal Revenue is at least beginning to taper off," the official said. "But there are other concerns like the Napocor’s funding requirement."

In its last PPM review, the IMF told the Arroyo administration to eliminate the budget deficit by 2006 but the fund is expected to move its own target after the government announced that it would not be able to balance its budget before 2009.

In its November PPM report, the IMF said the Arroyo administration has to undertake a major fiscal adjustment to prevent its deficit problem from spiraling out of control, adding that the bulk of the effort would have to come from revenues since it could not afford any more cuts in spending.

The best that the government could do on the expenditure side, according to the IMF, was to streamline its bureaucracy in order to free up resources that would balance the budget while still meeting its social and infrastructure requirements.