Philippines rides rough water as banks, IMF hesitate over loans
A team from the International Monetary Fund arrived in Manila this week to help rescue the politically-troubled Philippines from possible default on its large debt obligations.
As investors become more concerned about the country's political future and as economic troubles continue, the Philippines faces the daunting task of not increasing it balance-of-payments deficit for the rest of the year.
Prime Minister Cesar Virata, who is also the finance minister, said last week that the task is necessary because with the staggering $1.36 billion deficit during the first three quarters, the country cannot expect additional capital from private banks. The total foreign indebtedness of the Philippines is about $ 18 billion.
Indeed, it will be extremely difficult times ahead for the Philippines, with the government slapping additional restrictions on credit, deferring more development projects, and imposing greater import controls. All these austerity measures are needed to achieve the somewhat unrealistic target of a zero deficit.
Although the IMF negotiations are going to be tough, the Philippines is likely to get the vital help. One of the IMF ''recommendations'' has been implemented - the hefty devaluation of the peso (by 21.4 percent) announced last week.
Following the devaluation, President Ferdinand Marcos and his Cabinet agreed to freeze wages and prices of all commodities, particularly oil, until a special Cabinet committee has assessed the impact of the new exchange rates. Central Bank Governor Jaime Laya did not discount the possibility of another exchange-rate adjustment by year's end.
Prime Minister Virata, returning last week from negotiations with the IMF begun in Washington late last month, gave assurances that despite the overwhelming deficit and the protracted IMF negotiations, the Philippines will not tread the path of Mexico and Brazil. He said that unlike Mexico, the country has not, and will not, default on any of its obligations.
''We will be able to meet all payments on time,'' the prime minister said.
The IMF negotiations are expected to be prolonged. This could be due to a major change proposed by the Philippines with regard to the program for a standby credit facility, which involves an increase in the IMF's ''special drawing rights'' for 1984. Once the increase in credit is approved, foreign lenders would be less inclined to withhold fresh loans (as they have in recent months), even if they shorten loan maturities.
However, the IMF support is not all that is needed to resuscitate the badly tattered Philippine economy. The other side of the coin, the political environment, has to show some signs of normalization, particularly popular disaffection created by the assassination of opposition leader Benigno Aquino Aug. 21.
As it now stands, the continuing anti-Marcos rallies, especially in the country's financial district, still bewilder and perturb international bankers and foreign investors. The Justice for Aquino, Justice for All (JAJA) movement, which has been the moving force behind recent protest actions, has come out with yet another threat.
Agapito Aquino, brother of the slain opposition leader and a JAJA spokesman, said that the group has planned a Manila-wide strike and civil disobedience campaign.
(Marcos postponed all official engagements Wednesday amid demonstrations, setting off speculation that Marcos, who has made no public appearances for the past few days, is seriously ill, UPI reports.)
Although he did not say when it would begin, he said the campaign will include school boycotts, transport strikes, sit-down protests by the urban poor, strikes by waiters in luxury hotels which are mostly government-controlled, and other forms of peaceful protest.