In recent months Philippine Prime Minister Cesar Virata has spent more time than he would like on dealing with his nation's foreign debt problem. ``But it is key to normalization in the Philippines,'' he said in a recent interview.
That effort at last appears to have paid off. He's scheduled to fly to New York the week of May 20 to sign a deal with some 300 commercial banks that will provide the Philippines with $925 million in new loans and about $3 billion of trade financing.
With this money, the Philippines should be able to ease its restrictions on imports and thereby enjoy a more healthy recovery.
``If we have a better recovery, we can do more coordinated rural development work,'' Mr. Virata said. Economic growth, combined with justice and the punishment of ``anyone who abuses the people,'' will help stop the spread of the Communist insurgency, he said.
The Philippines has some $26 billion in external debts. A debt crisis began in October 1983 when the Philippines was unable to service its debts on time. Since then the Philippines has had to ask for seven extensions of a freeze on payments of the principal. It has been paying only the interest on its debt.
Getting the Philippine debt rescheduled has been ``one of the more difficult ones,'' said David L. Pflug Jr., chairman of the 12-bank ``advisory committee'' that has negotiated with Philippine officials and among the commercial bank lenders themselves.
The most recent hang-up was the refusal of the National Commercial Bank of Saudi Arabia to join in providing new funds. It held that its loans were to finance oil shipments and thus special.
Groups of commercial banks, in rescheduling the debts of developing countries, believe it crucial that all banks with outstanding loans in a nation must share the burden of extending further new credits. Such new commercial bank credits are indeed usually required by the International Monetary Fund (IMF) when it makes a loan to a country in a balance-of-payments crisis. Otherwise, the fund could be accused of ``bailing out'' the commercial banks, since the IMF could be used by the nation to pay back a portion of the commercial bank loans.
Saudi banks have been allowed to leave loan syndicates for other sovereign borrowers because their exposure has been small. But the National Commercial Bank has lent about $150 million to the Philippines. The commercial bankers feared that if the Saudi bank got away with not providing its $12 million share of the $925 million in new money for the Philippines, it would set a bad precedent.