Fiscal, monetary authorities defend $1-B loan to IMF
Extending a $1-billion loan to the International Monetary Fund (IMF) is the country’s way of helping stabilize the world economy, Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. said yesterday.
“This is the reason why the Philippines is extending a $1-billion loan to the IMF. We are a member of the global community of nations and it is also in our interest to ensure economic and financial stability across the globe,” Tetangco said in a statement.
He explained that the IMF uses contributions to help member-countries in financial distress.
“For about 40 years until 2006, the Philippines itself had been a net borrower from the IMF. We finally fully paid our loans to IMF in December 2006 as the implementation of continuing reforms have made our economy stronger,” he added.
He said the Philippines has managed to build up its gross international reserves (GIR) to about $76 billion and is now capable of extending loans to other countries.
“Today, our economic fundamentals are sound, our banks are able to meet domestic credit needs, and we are capable of lending $1 billion from our international reserves to the IMF. This is a loan to the IMF and we will get our money back with interest,” he clarified.
He pointed out that the proposed loan would earn money for the Philippines.
“In effect, by extending a loan to the IMF that will earn money for the Philippines, we are also able to help other nations saddled with financial problems. Other nations have also committed to help IMF address the current financial crisis,” the BSP chief said.
For his part, National Treasurer Roberto Tan said the loan is not part of the government’s general fund and thus cannot be used for state programs and projects.
“The BSP cannot lend it to us (national government) unless during emergency circumstances,” Tan stressed.
In the long run, Tan said the $1-billion loan would have positive impact on the global economy and on the Philippines in particular.
“We’re helping to minimize the effects of the global crisis,” Tan stressed.
No stopping loan
Despite some protests, Malacañang is not inclined to withdraw the $1-billion pledge but is open to investigation into the issue.
Presidential spokesman Edwin Lacierda said critics of the loan plan should not confuse the BSP funds with those being used for projects.
He also rejected claims by some critics that the government would rather pander to the wishes of the IMF than address the needs of the poor and ordinary Filipinos.
“And so to say we’re not addressing our countrymen is a total fallacy. And those people who are in the know should know; those people who’d like to criticize this government should look well into what we’ve been doing for the past two years,” he said.
He cited the P45-billion funding for the conditional cash transfer (CCT) program to alleviate hunger and poverty. Lacierda said 3.8 million Filipino families are benefiting from the CCT program.
“We’ve got our assistance ( for) irrigation; we’ve got our universal health coverage. That’s why we’re pushing for sin tax reform – for the passage of the sin tax bill (to raise revenues). We’ve got a number of social (poverty) alleviation programs that we are pushing for,” Lacierda said.
Lacierda stressed the Philippines should not turn its back on other countries that host thousands of Filipino workers.
“We get $4 billion by way of overseas remittances from Europe. Overall, around $17 to $18 billion of remittances come from (overseas Filipino workers). We’re investing $1 billion to the fund, which will help provide global stability,” he said. “Would you rather (that we help) when the economy of Greece, Spain have already fallen and caused domino effect among European countries?”
He likened the assistance to European economies to water being sent to put out a fire.
“It’s in our interest as well. It will help the other countries and that’s why we’re providing a loan – by the way it’s a loan and it’s not a dole-out, again, to IMF. You may have concerns, nobody has questioned that,” Lacierda said.
“We are not wasting the money. It’s a loan. IMF would pay us back the loan. Non-monetarily, it’s going to help us because it’s going to help the economy of Europe,” he said.
“BSP is looking into our interests as well. So they may ask the Bangko Sentral but the Bangko Sentral (has) already committed the P1 billion and it’s going to be returned to us. There is no fear that it will not be returned to us,” Lacierda said.
He also said President Aquino has full confidence in the competence of Tetangco.
“It (decision to offer loan) shows the prudent management and the able fiscal stewardship of the Bangko Sentral under Governor Tetangco. And I am certain that he will not place the money of the Philippines in (an) investment that is not consistent with making sure that our money are fiscally preserved,” Lacierda said.
Pat on the back
For Parañaque Rep. Roilo Golez, the Aquino administration should even be commended for offering the loan.
“With the historic and unprecedented act of lending $ 1 billion to the IMF, the Philippines stands proud and tall in the community of nations, thus enhancing our standing as an investment haven and one of the emerging tiger economies of the world,” he said.
In Resolution 2522, Golez said the Aquino administration’s “singular act” of extending the loan has boosted the country’s “image and stature as an emerging tiger economy.”
He said the loan “is not an expenditure but an investment that adds to the coffers of the government and is a sound way of utilizing the country’s huge foreign exchange reserves, now over $75 billion.”
He noted that the country has been receiving accolades from economists for its healthy economy.
Meanwhile, Senators Gregorio Honasan and Ralph Recto said the government appeared to have rushed the decision to lend to the IMF.
“Transparency is a basic constitutional principle,” Honasan said. –