Press Release No. 05/102

Press Release: IMF Deputy Managing Director Agustín Carstens at the Conclusion of his Visit to the Philippines

May 11, 2005

Mr. Agustín Carstens, Deputy Managing Director of the International Monetary Fund (IMF), issued the following statement today in Manila at the conclusion of his visit to the Philippines:

"I am delighted to have had the opportunity to make my first visit to the Philippines over the past few days. During my visit, I had the privilege of meeting with President Arroyo, Senate President Drilon, and House Speaker de Venecia, as well with Finance Secretary Purisima, Acting Bangko Sentral ng Pilipinas (BSP) Governor Tetangco, and other members of the economic team. I was also able to participate in a conference on capital market reform and government bond market development in the Philippines that was hosted jointly by the BSP and the IMF. I am pleased to report that the conference was a great success with international experts sharing experiences with promoting capital market development from their own countries.

"In my discussions with the President, senior legislators, and the economic team, I welcomed the progress the new administration has made in advancing its economic reform agenda since taking office in the middle of last year. Completing these reforms will be crucial for reducing vulnerabilities and initiating a virtuous investment-growth cycle.

"The passage of the VAT bill this week represents another major step forward in the reform process. At this stage, we do not have all the details on the final VAT package, but we trust that it will generate sufficient revenue to facilitate a large first step towards balancing the budget, and reassure markets about the authorities' commitment to tacking the fiscal problem. Increased revenue will also create the fiscal space for needed development expenditures.

"I was also encouraged to hear of current initiatives to advance financial sector reform and particularly look forward to passage of the amendments to the BSP Charter that will strengthen legal protection for bank supervisors. The other topic that figured prominently in our discussions was power sector reform, where we agreed that the imperative is to push forward with privatization to promote private investment in the sector."