Huge payments deficit brings new devaluation in Philippines
The Philippines devalued the peso Wednesday by 21.4 percent, with the exchange rate falling from 11 to 14 pesos to an American dollar. It was a major setback for President Ferdinand Marcos.
This is the second time this year that the government devalued the peso, the first time occurring in June, when the value dropped 7.2 percent.
The latest devaluation move was triggered by a $1.36 billion balance-of-payments deficit in the third quarter, explained Gabriel Singson, the central bank's senior deputy governor. This compares with a shortfall of $1.1 billion for the whole of 1982.
The staggering jump in the payments deficit indicates that on the economic front, Marcos's 18-year rule has placed the economy in a far worse situation than what his government claims.
A first blow hit the political front Tuesday when President Reagan postponed his trip to the Philippines. Mr. Reagan's visit was hoped to be an endorsement of the Marcos government, which has been beleaguered since the Aug. 21 assassination of Benigno Aquino, the popular opposition figure. With accusing fingers pointing at Marcos's administration, his credibility has fallen.
The political ebb is indicated by the continuing anti-Marcos rallies and demonstration, despite tough government measures against protest actions. In his latest move to clamp down on antigovernment mass actions, Mr. Marcos signed a decree that imposes death as the penalty for subversion. It is also remarkable that the focal point of anti-Marcos protests is Ayala Avenue, the staid and formerly politically conservative Wall Street of Manila.
Wednesday's devaluation move is an apparent last-ditch attempt on the part of the Philippine government to correct the country's wayward deficits. Tackling the payments deficit is the crux of the two-pronged negotiations going on between Filipino monetary officials and the International Monetary Fund (IMF). The negotiations are for:
* The drawdown of the last two tranches (due in November and February) of the amount a nation can borrow from the IMF.) A key condition for the drawdown of the full facility is for the balance-of-payments deficit to be reduced to less than $1 billion a year.
* The size of next year's standby credit, which could be less than this year's $345 million.
According to the central bank's devaluation announcement, the record payments deficit can be attributed mainly to the slowdown in the inflow of medium- and long-term loans and not payment of short-term capital, which is ''in line with our conscious policy to reduce foreign indebtedness.''
The central bank also admitted there has been some flight of capital in recent weeks.
The IMF talks are crucial, particularly at these politically troubled times in Manila. International bankers and foreign investors are concerned over the government's survival and are therefore ever vigilant about their exposure to the country. They are thus looking at the IMF for guidance on whether or not to continue propping up the ailing economy.
For the IMF to get tougher, and to cut the amount of loan money available and prolong the negotiations for the 1984 standby facility, could mean a cut in the flow of foreign loans and investments which now virtually keep the Philippine economy afloat.