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Philippines peso level good for exports

BANDAR SERI BEGAWAN: Philippine Finance Secretary Jose Pardo said the peso's current range boosted export competitiveness.

Pardo, attending a meeting of Southeast Asian finance ministers in Brunei's capital, told Reuters late on Saturday the government was also confident of achieving its fiscal deficit target for 2000.

Pardo said growth in the current year will be broad-based and led by the services sector.

"Inflation, meanwhile, is projected at 6.0-7.0 percent in 2000 and expected to go down to 5.5-6.5 percent in 2001," he said.

The government is committed to push ahead with economic reforms and make the Philippines an attractive destination for investors, he said.

The finance secretary said the government was continuing to provide the necessary fiscal stimulus to build infrastructure, albeit at a slow pace, to prevent the deficit from ballooning.

The Philippines expects to rein in the budget deficit to 62.5 billion pesos in 2000 against 111.7 billion in the previous year. It had initially forecast a budget deficit of 64 billion pesos in 1999.

"The budget was efficiently deployed and productively used and helped to avoid a recession," Pardo said. "But I must add that it placed pressure on the fiscal resources".

Pardo said the government's budget deficit will not crowd out private investment or create pressure on interest rates.

"We are allowing for private sector investment-led growth whereas last year it was government-driven," he said. "Now we are not wanting to crowd out local industries and private sector in the loan market".

The Philippines will lean more on global capital markets to raise funds to met its borrowing needs, he added.

Pardo said about 58 percent of the nation's borrowings will be funded externally and the rest domestically.

"We are looking at foreign markets for sourcing our debts," he said, adding that about $1.7 billion will be raised from external sources to finance debts and repayments. "Externally we have successfully raised close to $800 million".

The finance secretary said that the authorities were carrying out a study of the country's debt maturity profile to decide on the timing of the next tranche of sovereign bonds.

Pardo said that there was no imminent presures on interest rates as the fiscal situation is expected to more manageable than last year.

The finance secretary said barring any sharp movements in regional currencies, including the Chinese yuan, and a hike in U.S. interest rates, the authorities should be able to hold on to the current level of interest rates.

Pardo said the current peso level between 40-41 per U.S. dollar was supportive of exports and contributed to their competitiveness.

"Thus, we believe that the peso is within a comfortable range," he said.

He said the central bank, Bangko Sentral, will continue to monitor currency movements to allow it to act against any speculative attacks.

But he reassured that the government would not impose capital controls to stem outflow of portfolio funds. "Imposing capital control is not part of our policy," he added.-Reuters