President Ferdinand Marcos announced today the conclusion of a long-discussed agreement with the International Monetary Fund on an economic recovery program that is expected to pave the way for billions of dollars in new loans and a restructuring of the Philippines' heavy foreign debt.
In a television address, Marcos called on Filipinos to "buckle down" and accept the sacrifices the agreement involves.
Economists and businessmen said the effects of the agreement would include a further slide in the peso's value against the dollar, higher gasoline prices, new taxes and a jump in the inflation rate to as much as 70 percent.
These effects are considered likely to provide further ammunition for Marcos' political opponents and student demonstrators at a time when his government is nervously awaiting a potentially explosive official report on the assassination last year of opposition leader Benigno Aquino.
The assassination triggered a political crisis that helped pitch the economy into a headlong decline. The gross national product is expected to shrink by at least 5 percent in real terms this year, with the deficit on current accounts running at about $1.5 billion.
"There is no question that our economic recovery program includes measures that entail sacrifices for everyone," Marcos said today. But he said these "sacrifices for the moment" would provide a "basis for confidence at this time of travail" and lead to future growth.
The agreement, signed in Washington by IMF executive director Jacques de Larosiere and a Philippine negotiating team led by Prime Minister Cesar Virata, after nearly a year of negotiations, provides for emergency standby credits of $650 million, Marcos said. The agreement still requires final approval by the IMF executive board, but this is expected when the board meets in November, Philippine officials said.
More important than the standby credits, the accord paves the way for rescheduling of roughly half of the Philippines' $25.6 billion foreign debt and for new commercial credits totaling $1.65 billion.
Virata and Central Bank Governor Jose Fernandez have been negotiating these arrangements with representatives of the Philippines' 483 foreign creditor banks.
In addition, the United States, Japan and South Korea have agreed to provide a bridging loan of $80 million.
Trade and Industry Minister Roberto Ongpin tonight called the IMF accord and the bridging loan "the clearest proof that allegations that the U.S. government is distancing itself from the Philippines are the purest bunk."
As part of the economic recovery program presented to the IMF in a letter of intent, Marcos said, the government would lift all foreign exchange controls by the Central Bank immediately and allow the peso to float. He said this would "mean a slight change" in the peso's value against the dollar, currently 18.45 at the official rate and 20.40 at the black market rate.
A little more than a year ago, the peso was valued at 11 to the dollar.
Ongpin said the peso now should float up to the current black market rate, resulting in an increase in gasoline prices.
Marcos said that "substantial improvement in tax performance is now imperative." He vowed more efficient tax collection and a "broadening of the tax base" with the closing of loopholes and removal of exemptions for government corporations.
He said the agreement was of "momentous significance to our effort for economic recovery and stability" and signaled "our resolve as a nation to live within our means."
Economists said they expected some new taxes. The revenue-raising measures are considered likely to be implemented through the use of Marcos' controversial decree powers, which would almost certainly trigger conflicts with the opposition in parliament.