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Monday, March 4, 2024

Gov’t welcomes IMF’s assessment, says fiscal reforms remain on track

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Budget Secretary Amenah Pangandaman said Wednesday the government’s fiscal consolidation program is on track as noted by the International Monetary Fund Tuesday.

“The economic team welcomes the positive outlook of the IMF which stated that ‘fiscal consolidation is on track, as envisaged under the Medium-Term Fiscal Framework [MTFF],” she said.

“We are on track precisely because we have an MTFF, which was an initiative of Secretary Ben [Diokno] at the start of the PBBM administration and later historically adopted by the Senate and House of Representatives, so that we would have a roadmap or agenda for prosperity,” she said.

“We are seeing these good results because we have a guide and targets for our economic progress,” she said.

She said the government’s fiscal consolidation strategy, which supports the administration’s socioeconomic development agenda, would be underpinned by increasing revenue effort through tax policy and tax administration reforms and declining deficit trajectory over the medium term.

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“For our part at the DBM, we will sustain government disbursements at above 20 percent of GDP [gross domestic product] on average as we continue to prioritize expenditures in support of the 8-Point Socioeconomic Agenda and the Philippine Development Plan 2023 to 2028,” she said.

An IMF team commended the country’s economic performance in its report following the conclusion of the IMF Staff 2023 Article IV Mission to the Philippines on Oct. 3, 2023.

The end-of-mission report confirmed that “the Philippine economy has emerged from the pandemic strongly.” It commended the on-point strategies of the Philippine Economic Team led by Finance Secretary Benjamin Diokno.

“Fiscal consolidation as envisaged under the Medium-Term Fiscal Framework is on track, reflecting a strong revenue performance and lower current spending, and its pace is appropriate to bring the national government debt-to-GDP ratio to less than 60 percent over the medium term,” the IMF said.

It also commended the efforts towards public private partnerships, saying this would lead to more investments.

“The renewed emphasis on financing the country’s infrastructure gaps through Public Private Partnerships [PPPs] is well placed and the new PPP Code is welcome in this regard. The reform of the mining fiscal regime and Mining Act provides an opportunity to enact a progressive and unified tax system, and a competitive investment regime,” it said.

It also highlighted the potential of the Maharlika Investment Corp., the country’s first sovereign development fund.

“The Maharlika Investment Corp. could contribute to the push for closing infrastructure gaps and green investments by following best practices in strategic investment management and accountability frameworks,” it said.

It lauded the Bangko Sentral ng Pilipinas for its handling of the inflation crisis, saying its decisive monetary tightening and moderate minimum wage hikes “helped mitigate inflationary pressures, with headline inflation now expected to return to the BSP’s target band by the first quarter of 2024.”

The IMF attributed economic challenges to persistently high global inflation, an abrupt global slowdown putting downward pressure on goods and services exports, an intensification in geo-political tensions, and depreciation pressures stemming from capital outflows under volatile market conditions.

It recommended a more ambitious revenue mobilization strategy that would enhance social spending needed to achieve poverty reduction goals.

IMF cut its growth forecast for the Philippines this year to 5.3 percent from a previous estimate of 6.2 percent on elevated inflation that hurt consumer spending.

IMF expects the economy to grow by 6 percent in 2024, faster than the 5.5 percent forecast it made in July.

It said the Philippines economy emerged from the pandemic strongly, but has since confronted a confluence of global shocks.

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