IMF tells Philippines to shape up


The IMF feels Philippine targets for growth are reasonable but the country needs to get its deficit under control

By staff and wire reports

MANILA, Philippines -- The International Monetary Fund has told the Philippine government to overhaul the country's financial system.

In a joint statement, Philippine authorities and the IMF have said the country needs to shore up its tax base, cut its deficit and get its banks in shape.

The IMF team currently visiting Manila said the year had been tough, "and will remain challenging for some time to come," local media reported.

But the IMF also said the Philippine government is being realistic, and the country seems on track to hit its growth targets for 2002.

The government estimates that gross domestic product will grow between 4.0 and 4.5 percent next year, a rate the IMF calls "reasonable" and a "decent basis" for economic policies and reform.

Review of policies

The group has been in the Philippine capital for a two-week review of the country's economic progress and financial policies.

The country's budget deficit is a major concern, and threatens to get out of control.

The Philippines posted a record budget deficit of 133 billion pesos ($2.55 billion) for the first 10 months of 2001.

Its 2000 deficit of 136 billion pesos ($2.6 billion) was double the 62.5-billion peso target the government had promised to the IMF.

The IMF's Asia Pacific economist, Charles Adams, says the PIT countries -- the Philippines, Indonesia and Thailand -- will have to rely on domestic demand for growth, through 2002.

The IMF has been much less critical of reforms in the Philippines than in Indonesia, where it is trying to get its loan program back on track.

The body has resumed loans to Jakarta after freezing them earlier this year, but it is still battling to hold Indonesia to a reform schedule.

With Japan in recession and Europe and the United States both slumping, the IMF has also cut its forecast for world growth.

Adams now expects world growth of 2.5 percent this year and next, lower than the IMF's official 3.5 percent estimate.

The world economy grew 4.7 percent in 2000. The IMF is due to revise its world forecast next week.