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Saturday, November 15, 1997 Published at 16:20 GMT


IMF chief cautions Manila over loans

Michel Camdessus: urged caution before leaving IMF

The Philippines must bolster its economy, strengthen its fiscal position and push administrative reforms when it finally leaves a borrowing programme from the International Monetary Fund, IMF chief Michel Camdessus said on Saturday.

The Philippines has been under IMF supervision for over three decades, tapping 23 borrowing programmes. The country is expected to leave the latest, a three-year extended fund facility, by the end of the year.

Mr Camdessus is in Manila following visits to Indonesia, Malaysia, Singapore and Thailand to discuss the currency turmoil that has rocked Southeast Asia.

His trip also coincides with an IMF monitoring team's visit to evaluate Manila's progress in leaving its latest borrowing programme.

Mr Camdessus praised the "quality and the continuity" of the Philippines' efforts to re-establish sounder economic policies and a stronger financial sector for helping it in the currency crisis over the past six years.

'The world is more dangerous'

But he warned: "There is no room for complacency."

"Even if the performance of your country has been good ... we must also consider that we are now living in more dangerous conditions," he said. "The world is a more dangerous place, a more challenging place."

Mr Camdessus said the government must consider whether, in a changed regional environment, its level of currency reserves and the solidity of its financial system are such that it can "leave without some kind of protective arrangement."

Over the weekend, Camdessus is scheduled to meet with senior central bank and finance ministry officials.

In order to exit from its latest - and the government hopes last - IMF borrowing program by the end of the year, the Philippines must meet numerous economic performance criteria and complete key structural reforms.

Delays in passing into law the last leg of a comprehensive tax reform package derailed an original plan to exit from IMF supervision by mid-1997.

A recent Supreme Court decision declaring illegal the law that deregulated the local oil industry nine months ago has also created doubts about the country's ability to exit the programme under the new target date.

The deregulation of the oil industry was a key reform required by the IMF in return for the extended fund facility, which guaranteed $684m (412m) in fresh loans to the country.

But Mr Camdessus said he saw little merit in extending the Philippines' current facility further, and that the IMF would consider "good reasons" for some targets not being met by the facility's December 31 deadline.

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