POSTSCRIPT / June 24, 2012 / Sunday


Philippine STAR Columnist

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Why lend $lB to IMF? It’s the SONA, stupid!

SONA SEASON: We are now into the SONA season, when government focuses on drawing up an impressive State of the Nation Address by the President before the Congress next month.

Since the worrisome drop in the approval rating of President Noynoy Aquino in the last surveys points to the economy as the culprit, expect him to try to overturn this negative point in his SONA on July 23.

Claims that the Aquino administration has curbed official corruption and brought in massive foreign investment fall flat when an increasing number of Filipinos claim, per survey, going hungry and wallowing in want.

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NON-EDIBLE INFO: So now the entire bureaucracy is busy looking for, or creating, data to prove that the administration has been doing a great job improving the lives of Filipinos aside from fighting corruption.

The hungry whose number seemed to have increased after the seasonal Christmas splurge cannot eat statistics, press releases and PowerPoint presentations, but never mind.

Malacañang’s stable of strategic propagandists, with assist from PR and marketing partners in the private sector, will take care of selling the glowing SONA being put together.

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RESURRECTED: The Aquino administration plan to lend $1 billion to the International Monetary Fund to help bail out foundering economies in Europe is better understood in the SONA light.

This Third World country that had been deprived under corrupt administrations of the past finally crept out of the dumps after the reformist Aquino administration took over.

Despite its $62.9-billion foreign debt, allowed to balloon under previous corrupt presidents, the Aquino administration has reversed the tide. The Philippines is now able to lend out $1 billion to the IMF.

Expect more fantastic revelations in the coming days, many of them with economic significance, as work on the SONA progresses.

Also expect the usual surveys and statistics showing that the economic situation has vastly improved and our people are in fact now happier, well-fed and very optimistic.

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UPBEAT BUSINESS: The Bangko Sentral ng Pilipinas has said that the country’s foreign debt has gone up by $1.2 billion to $62.9 billion because of higher investments in January to March.

The BSP said: “The increase is due largely to the $2.3 billion net availments (excess of borrowings over repayments) as investment and business activities by both the public and private sector entities escalated due to the upbeat business sentiment.”

It added that the country’s external debt, which by the way is smaller than the domestic debt, remained manageable as of end-March.

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B.S.P. SIDE: Shedding more light into the planned loan to the IMF, BSP Deputy Gov. Diwa Guinigundo told Postscript late yesterday that the fund would be sourced from the bank’s Gross International Reserves.

He said that, strictly speaking, this money is not the government’s, and “therefore cannot be sequestered for debt servicing for public sector debt (minus BSP’s) or infra, social projects, etc., which are funded from the national budget.”

The projected loan, he said, will earn interest. “The interest rate is basically SDR (special drawing rights) rate,” he explained. “It varies everyday. So far, it’s low at around 0.3 percent on account of low global interest rates.”

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WHY THE LOAN: Guinigundo invited us to look at the loan this way:

“We need to be strategic and assume a global perspective. Europe is on fire. If we don’t share in the global efforts, there is a potential risk the problem could spill over to this region and bring about greater harm to the Philippine economy and financial markets.

“Europe is an important market for our exports and overseas Filipino workers (OFWs). It is also an important investor and source of official development assistance (ODA). It will be more useful to look at this contribution that way.”

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I.M.F. REQUEST: Guinigundo explained to Postscript the background of the projected Philippine contribution to IMF:

“Managing Director Christene Lagarde wrote us to formally request our assistance. She also indicated such a request to the other countries in order to globalize the effort for stabilization. While the problem resides in Europe, its implications are global.

“Hence, it calls for a global solution. It was indeed not of our own making, but it is to our best interest to help avert a more serious turmoil before it gets to our shore.

“There is positive externality to this preventive stance.”

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B.O.P SURPLUS: Moving to related topics, Guinigundo told Postscript: “Since 2005, the Philippines has been achieving Balance of Payments surpluses and as a result, the GIR has also been enlarged.

“The bottom line is that we have a comfortable GIR which is more than enough to cover more than 10 months of imports of goods and services.

“The First Quarter 2012 Balance of Payment surplus, for instance, was recorded at $1.2 billion and we expect further accumulation for the rest of the year.”

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EXTERNAL DEBT: On the country’s external debt, Guinigundo said: “Our end-March 2012 external debt level stood at $62.9 billion. Short-term debt, maturing in 12 months, is around 12 percent.

“With GIR of nearly $77 billion and foreign currency deposit of around $25 billion, we have very manageable level of external debt.

“In fact, over the years, we have been able to reduce the external debt-to-GDP ratio from about 70 percent ten years ago to just about 27 percent at end-March 2012. This was duly noted by the credit rating agencies.”

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(First published in the Philippine STAR of June 24, 2012)

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