From the Executive Board

• Pages: 250-251

Page 250

Philippines: Extension and Augmentation of EFF

The IMF approved a request by the government of the Philippines to extend until December 31, 1997 the current SDR 474.5 million (about $652 million) Extended Fund Facility (EFF) credit for the Philippines, and to augment it by SDR 316.7 million (about $435 million) to support the government's 1997 economic policies. A total of SDR 508.8 million (about $699 million) is immediately available to the Philippines. The remaining SDR 246.0 million (about $338 million) will be made available following a review of performance under the program and based on end-September performance criteria. The IMF approved the current three-year EFF on June 24, 1994 in support of the Philippines' medium-term economic and financial program (see Press Release No. 94/43, IMF Survey, July 25, 1994). The EFF was due to expire on July 23, 1997.

[ GRAPHICS ARE NOT INCLUDED ]

In approving the request of the Philippines for an extension and augmentation of the EFF, the IMF made use, for the first time, of the accelerated procedures established under the emergency financing mechanism (EFM). The EFM was adopted in September 1995 to strengthen the IMF's ability to respond swiftly in support of a member country facing an external financial crisis and seeking assistance from the IMF in support of a strong macroeconomic adjustment program.

The performance of the Philippine economy under the EFF-supported economic program has been satisfactory. Real GDP growth accelerated to 5.7 percent in 1996, inflationary pressures were kept under control, and net international reserves increased to the equivalent of 2.8 months of imports. This performance allowed the Philippine authorities to opt, after making an initial drawing of SDR 36.5 million ($50 million), to treat the EFF approved in 1994 as precautionary and to anticipate not making any further drawings before the EFF expires in mid-1997.

While the macroeconomic program remained broadly on track in the first quarter of 1997, the authorities faced a number of important challenges in the second quarter, including increasing turbulence in the foreign exchange market, slippages in fiscal performance, and a delay in the passage of proposed tax reforms. The combination of a relatively rigid exchange rate and high domestic interest rates encouraged a large inflow of external resources into the Philippine...