Massive spending by the government and party of President Ferdinand Marcos on this month's election has plunged the Philippine economy into a new crisis, according to economists and businessmen.
The spending, which the sources charged went to vote-buying, campaigning outlays and allocations for "pork barrel" public works projects, has created excess liquidity and forced the Central Bank today to announce emergency corrective measures in an effort to comply with International Monetary Fund requirements.
Economists expressed concern that the flood of money into the economy could endanger a painstakingly negotiated agreement with the IMF on an economic recovery program. The program involves a debt-restructuring agreement with more than 300 creditor banks under which the banks are providing $3.9 billion in new loans and trade credits and accepting delayed payments on $5.8 billion of the country's $26 billion foreign debt.
An IMF team recently postponed a trip intended to assess compliance with the program before releasing a new installment of a $650 million IMF standby loan.
As a result of the disputed election, in which Marcos was officially declared the winner over opposition challenger Corazon Aquino, the Philippines now faces higher inflation, a steep increase in interest rates, slower growth and a devalued currency, economists and businessmen said.
"This means business is going to have one hell of a time again," said leading Philippine company executive.
The sources charged an apparent violation of the agreement with the IMF in the form of an increase in reserve money to 41.5 billion pesos (about $2.07 billion), which exceeds a ceiling agreed with the IMF by 4.5 billion pesos (about $225 million).
But potentially more troublesome are persistent charges that new peso notes have been issued with the same serial number, a practice that could defeat efforts to keep track of the money supply and could swell it several times bigger than its recorded size.
Central Bank Gov. Jose B. Fernandez Jr. denied today that multiple bills with identical serial numbers had been printed or that demonetized currency had been used for election purposes. He was responding to a photograph in Veritas, a newspaper backed by the Catholic Church, of three 100-peso ($5) notes with the same serial number.
Fernandez said that the bills were found to be genuine but that someone had altered the numbers to make them the same, in what he suggested was an effort to discredit the Central Bank.
However, the editor of Veritas, Felix Bautista, said the bills had been turned over to the newspaper by the leader of the Philippine Roman Catholic Church, Cardinal Jaime Sin. Bautista said Sin explained that the bills were given to him by someone he knew and trusted.
In a news conference, Fernandez announced a steep increase in the yield of Central Bank bills, the country's major open-market instrument, to a range of 28-30 percent from the previous 19-21 percent. He said the move came in response to fears of "a resurgence of double-digit inflation and instability in the foreign exchange markets" following a sharp drop in the value of the peso against the dollar.
Fernandez denied that the measure had anything to do with the declaration yesterday by Aquino of a boycott against a number of business, media and financial institutions, including seven banks controlled by the government or friends of Marcos.
Asked whether the current liquidity difficulties were due to election campaign spending, Fernandez said tersely, "The figures speak for themselves." He acknowledged that the remedy, which is expected to be raised bank interest rates, will make economic growth this year more difficult to achieve.
"It will be another difficult year," he said.
The economy shrank by 5.5 percent in 1984 and 4 percent in 1985, but had been expected to grow by as much as 1.5 percent this year under the prescriptions of the IMF economic recovery program. Now, however, according to an economist of the Center for Research and Communication, a private economic think tank, the gross national product is expected to drop this year by 3 percent.
"The painful process of paying for the election has started," said the economist, Omar Cruz. "I'm very pessimistic. The effects of this election are quite debilitating. A lot of people are discouraged, and businesses are at a standstill. Everything is just turning red."
The economic situation also came under sharp attack from the camp of opposition leader Aquino. In a press released issued today, her media bureau said the increase by 9 percentage points in the yield of Central Bank notes stems from the ruling party's "excessive election spending and clearly taints the claim of Mr. Marcos that he is an inflation fighter."
It said resulting increases in bank lending rates "will be passed on to the business sector and to the general public." It foresaw layoffs, industrial unrest and spiraling commodity prices.
Independent economists estimated before the election campaign began in December that Marcos' party and government would spend $150 million to $250 million on the reelection effort, then doubled the estimates.
Now, said Cruz, "the assumption is that that was on the low side." He added, "The amount of money they pumped in is so much. Everybody is still guessing as to how much money is all over the country."
One possible indicator, economists said, was Gov. Fernandez's admission today that reserve money has risen by 9.8 billion pesos (about $490 million) since December, including 3.8 billion pesos ($190 million) in the first 40 days of this year.