News Brief: IMF Completes Philippines Review, Approves US$314 Million Disbursement

August 1, 2000

The Executive Board of the International Monetary Fund (IMF) yesterday completed the fifth review under the stand-by credit for the Philippines. This opens the way for the release of a further SDR 237.6 million (about US$314 million) from the arrangement, bringing total disbursements under the current program to SDR 783.2 million (about US$887 million).

At the conclusion of the Executive Board’s discussions on the Philippines, Mr. Shigemitsu Sugisaki, Deputy Managing Director, stated:

“Directors welcomed the steps the authorities had taken to allow the program review to be completed after a long delay. They noted the recent macroeconomic results: economic recovery is underway, inflation has been lower than programmed, the external position has strengthened, and progress has been made in implementing structural reforms under the program.

“To preserve these gains, and in order to restore market confidence, which has been affected by the earlier delays, further progress through the remainder of the program period was seen as essential. To this end, it will be critically important to ensure that the fiscal program targets for 2000 are met, and that continued strong progress is made in implementing key structural reforms. For 2001, Executive Directors asked the authorities to aim at a further reduction of the national government budget deficit, preferably through a stronger revenue effort, in line with the medium-term consolidation goals established earlier.

“Monetary policy has been appropriately supportive of the recovery, with inflation well under control. The Bangko Sentral’s plans to adopt an inflation targeting framework in 2001 are welcome, as it will help sharpen the focus and improve the transparency of monetary policy.

“Good progress has been made in recent months in advancing the structural reform agenda, and it is vital that this momentum be sustained. In particular, the recent enactment of several key reform laws, such as a new General Banking Act, the Securities Act, and a law liberalizing retail trade, is most welcome. While recent progress with power sector reform legislation is also encouraging, early final passage of the law is critical to enable the long-overdue restructuring of the sector, including privatization of the National Power Corporation. Banking reforms under the program have generally been successful in strengthening the system’s capacity to withstand shocks; after some delay, rehabilitation and full privatization of the Philippine National Bank, an essential part of this program, is now underway. The authorities’ latest initiatives to combat money laundering are most welcome, although Directors stressed the need to follow through with proposed legislation in this area,” Mr. Sugisaki said.


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