The Arroyo administration is expected to present its economic plan to the IMF, including its gross domestic product (GDP) target this year of between 3.8 percent and 4.3 percent, gross national product (GNP) of four to five percent, and a projected budget deficit of P145 billion.
This despite the less than bullish growth forecast of 3.3 percent by the Fund.
Finance Secretary Alberto Romulo said, however, that government is standing pat on its numbers. "In fact, we hope to have better numbers the next time we review our program."
Both sides agree that the economy will rebound this year, but differ in the estimates of how much the recovery will be.
A post-program monitoring is necessary, especially after government exceeded the quota of $1 billion in loans from the IMF. The country’s outstanding loans already topped $1.77 billion.
The Philippines can only depart from the IMF program after it retires some of its loans and trims its loans below the quota allocation from the IMF.
Under the arrangement, the IMF will assess the country’s economic performance at least three times a year for a period of two years.
The monitoring will not involve new loans from the IMF. Instead, the IMF will issue an aide memoir to reflect its assessment of the economy after each review. There will also be no letter of intent or performance criteria to be observed, a departure from the usual practice in the last three decades the country has been under IMF supervision.
Under the post program monitoring, the IMF will assess the country’s economic performance by comparing actual figures with set targets. This is normally done after a member-country completes an exit program with the Fund.
The monitoring is done to assure international investors and creditors the country will continue to implement agreed-upon fiscal and monetary reforms and policies. These include ensuring local and foreign loans are paid in conformity with the signed schedules.
The IMF has expressed concern about the government’s fiscal program, especially after it earlier raised doubts about the government’s capability to keep a lid on its budget deficit as well as its [too optimistic" macro-economic targets.
The IMF said the government might be taking a big risk capping its budget deficit this year to P145 billion. The IMF is worried the Arroyo administration might be repeating the practice of the previous administration which set the 2000 budget deficit to just P62.5 billion but could not keep a lid on the swelling budgetary shortfall which reached P136.1 billion.
A $1.4 billion standby credit facility was provided under the program, of which only about $1.1 billion was drawn by the Bangko Sentral ng Pilipinas (BSP) for its balance of payments requirements.
The BSP did not avail itself of the last tranche of the loan after failing to deliver structural reform measures.