Government asks IMF to replace its chief of mission in RP

The Philippine government has officially asked for the removal of Joshua Felman, chief of the International Monetary Fund’s (IMF) Philippine mission, for his alleged involvement in the fiasco involving investment bank UBS Warburg, a well-placed source said over the weekend.

The IMF is currently represented in the Philippines by Vikram Haksar but Felman is the official head of mission who visits the country several times a year to oversee the conduct of key evaluation missions, including the so-called Article IV review or post program monitoring.

Felman was implicated in the controversy surrounding an unauthorized disclosure of critical information to investment giant, UBS Warburg who later told Asian Wallstreet Journal that the IMF was suspecting anomalies in the country’s current account data.

The article appeared a few days into the book-building process for a $500-million global bond issue that the Philippines was undertaking. The jitters caused by the article cost the government at least 25 basis points and angered finance and central bank officials.

In a letter, UBS had admitted that its officials met with Felman who reportedly expressed his apprehension over the country’s current accounts, creating a perception that the government was fudging with key macro-economic indicators.

Felman’s motives remain unclear but the source said the IMF mission head had always been critical of the government’s handling of its deficit problem and its resistance against the IMF’s recommendation to raise taxes as a step towards increasing revenues.

UBS has formally apologized for its disclosure but the source said the Philippines is not satisfied with the apology and wanted to resolve the „bad blood" between the IMF and the Philippines.

According to the source, the Bangko Sentral ng Pilipinas (BSP) has formally requested the IMF to remove Felman from his position and to assign someone else to head the Philippine mission.

The source said Philippine officials "could no longer with Felman due to loss of confidence. The only way to smoothen relationships between the IMF and the Philippines, the official said, was for the IMF to appoint a new head of mission.

The source said the IMF has not issued a reply.

Since the Philippines emerged out of IMF tutelage, its relationship with its biggest creditor has become increasingly strained over the last few years with the fund growing more pessimistic about the country’s prospects.

Its deficit estimates reflect its extreme pessimism as it projected that the country’s budget deficit of as high as P262.88 billion, equivalent to 6.2 percent of gross domestic product (GDP), for 2003.

The IMF’s estimate is way over the official projections of the Arroyo administration whose programmed deficit is only P202 billion for the whole year.

The IMF’s estimated that the country’s GDP will reach P4.24 trillion in 2003 while gross national product was expected to reach P4.496 trillion. Both figure are lower than the projections made by the government.

The fund has projected that the GDP will grow by only 3.5 percent compared to the Arroyo administration’s 4.2 to 5.2-percent growth projection for 2003.

IMF’s lower GDP estimate will also raise the proportion of the deficit to the GDP to 6.2 percent, compared to the 4.6 percent set by the government – Des Ferriols