Big Interviews, Commodities, Economics, Philippines, Politics - Sunday, June 1, 2008 14:01 - 0 Comments

Margarito Teves, Philippines finance minister: facing the hard work being undone

Euromoney, June 2008

It was all going so well. In the last three years the Philippines has been the poster child of emerging markets fiscal policy, turning a crippling deficit into an almost balanced budget. But having done all the hard work, it may all be derailed, thanks to the twin threats of the soaring oil price and rising food prices.

It’s worth recalling just how bad things once were in the Philippines. In 2004, government debt was equivalent to 79% of GDP, and interest payments on that debt were eating 37.3% of all revenues. That meant more than a third of all incoming money, in a poor country battling a host of challenges from El Nino to the oil price, was going straight to banks, rather than to roads or education. Fixing the situation involved a lot of pain: broadening the tax base, completely reforming the tax collection mechanisms, pushing through privatisations that had been deadlocked for years, shifting funding policy from G3 currencies to the local debt markets, and dedicating money that could have been spent on social services on bringing down the debt load instead. Continue…

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