## Press Release: IMF Approves Extension and Augmentation of EFF for the Philippines

_IMF News, July 18, 1997_

## Source details

**Canonical URL:** [Press Release: IMF Approves Extension and Augmentation of EFF for the Philippines](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9733)

## Other formats

- [Markdown version](/en/news/articles/2015/09/14/01/49/pr9733/index.md)
- [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr9733/index.json)
- [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr9733/bundle-manifest.json)

## Bibliographic details
- Published: July 18, 1997

---

### IMF decision and financial terms
- The IMF approved a request by the government of the Philippines to extend until December 31, 1997 the current SDR 474.5 million (about US$652 million) Extended Fund Facility (EFF) credit for the Philippines, and to augment it by SDR 316.7 million (about US$435 million).
- A total of SDR 508.75 million (about US$699 million) is immediately available to the Philippines.
- The remaining SDR 245.95 million (about US$338 million) will be made available following a review of performance under the program and based on end-September performance criteria.
- The IMF approved the current three-year EFF on June 24, 1994 in support of the Philippines’ medium-term economic and financial program; the EFF was due to expire on July 23, 1997.
- The extension and augmentation made use, for the first time, of the accelerated procedures established under the Emergency Financing Mechanism (EFM).

### Context and recent developments (Background)
- Under the EFF-supported program, real GDP growth accelerated to 5.7 percent in 1996.
- Inflationary pressures were kept under control in 1996.
- Net international reserves increased to the equivalent of 2.8 months of imports.
- The authorities initially treated the 1994 EFF as precautionary after an initial drawing of SDR 36.5 million (US$50 million) and anticipated no further drawings before mid-1997.
- In the second quarter of 1997 the authorities faced:
  - increasing turbulence in the foreign exchange market;
  - slippages in fiscal performance;
  - a delay in the passage of proposed tax reforms.
- Contributing factors to the turbulence included a relatively rigid exchange rate, high domestic interest rates, and large inflows of external resources including unstable short-term capital.
- The peso came under pressure following recent regional capital market turbulence, with pressures intensifying after the float of the Thai baht on July 2 and causing significant depletion of international reserves.
- The authorities floated the peso on July 11 and supported this action with strong fiscal and monetary policies.
- The government requested the EFF extension and augmentation until end-December 1997 to:
  - allow passage of tax reforms and completion of the final review of the EFF;
  - support the peso float to discourage speculative capital flows.

### The 1997 Program: objectives and policy measures
- Program macroeconomic objectives for 1997 (supported by the EFF):
  - Achieve economic growth of 6.3 percent after 5.7 percent in 1996.
  - Reduce the average rate of inflation to 6.5 percent from 8.4 percent in 1996.
  - Contain the external current account deficit to about 4½ percent of GNP after a deficit of 4.3 percent of GNP in 1996.
  - Hold net international reserves equivalent to 2.1 months of imports of goods and services by the end of the year.
- Monetary and exchange rate policy:
  - New exchange rate policy supported by strong monetary policies.
  - Interest rates will be kept high for some time until the foreign exchange market stabilizes.
  - Base money growth is to be reduced to keep annual broad money growth at 23 percent, a rate consistent with the inflation and growth targets.
- Fiscal policy:
  - Fiscal policy will be tightened in the second half of 1997 to offset slippages in the first half.
  - Target to achieve a public sector surplus of 0.3 percent of GNP for 1997, after a surplus of 0.1 percent of GNP in 1996.
  - Fiscal tightening will include revenue-enhancing measures as well as expenditure cuts.
- Structural measures:
  - Passage of the remaining elements of the Comprehensive Tax Reform Package to strengthen savings performance.
  - Strengthening the financial system through:
    - tightened limits on banks' exposure to the real estate market;
    - new liquidity requirements to discourage the growth of foreign currency liabilities;
    - removing tax disincentives to peso deposits.

### Key country IMF position and financing status
- The Philippines joined the IMF on December 27, 1945, and its quota is SDR 633.4 million (about US$871 million).
- Its outstanding use of IMF financing currently totals SDR 188 million (about US$258 million).

### Selected Economic Indicators (as presented)
- Real GDP growth:
  - 1994: 4.4
  - 1995: 4.8
  - 1996: 5.7
  - 1997*: 6.3
- Consumer prices (year average):
  - 1994: 9.1
  - 1995: 8.1
  - 1996: 8.4
  - 1997*: 6.5
- Consolidated public sector balance (deficit-):
  - 1994: -0.6
  - 1995: -0.1
  - 1996: 0.1
  - 1997*: 0.3
- External current account balance (deficit-):
  - 1994: -4.5
  - 1995: -4.3
  - 1996: -4.6
  - 1997*: (no figure shown in source table)
- Net international reserves (Months of imports):
  - 1994: 2.7
  - 1995: 2.2
  - 1996: 2.8
  - 1997*: 2.1
- Sources: Philippine authorities; and IMF staff estimates.
- * Program.

*International Monetary Fund press release (Press Release No. 97/33, July 18, 1997).*

---


## References

- [Philippines and the IMF](http://www.imf.org/external/country/PHL/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9733_