Finance minister of the Year/ Asia: Margarito Teves, Finance Secretary, the Philippines
In previous bouts of financial market crises, the Philippines has been one of the first victims of contagion due to its high external debt and interest burden.
While few countries will be immune from the current turmoil, in late 2008 the sovereign credit default swap spreads for the Philippines were tighter than for several countries that have higher credit ratings, such as Kazakhstan or Bulgaria. According to Reza Baqir, the outgoing International Monetary Fund representative in the country: “Significant reforms in fiscal and banking sectors in the past few years, as well as the build-up of foreign reserves in good times, have lessened the economy’s vulnerability.”
The measures to reduce this vulnerability included boosting revenue collection and widening the tax base, in a country where government revenues have been as low as 14% of gross domestic product (GDP). “We have been helped by drawing support from other parts of government, like the local government assurance units, social security, the land transportation office and the securities exchange commission,” says Mr Teves. The department has also undertaken the computerisation of all revenue offices, a process that is now almost complete.
Another vital component has been the strengthening of the financial condition of state-owned enterprises (SOEs), especially the National Power Corporation, including the privatisation of its assets. About 70% have been sold so far, and the SOEs generated a total surplus of 60bn pesos ($1.27bn) in 2007, compared with a 1.1bn peso deficit in 2006.
Despite the turbulence, Mr Teves is determined to maintain a cautious budgetary stance to avoid a fresh build-up of debt. “Our original goal of a balanced budget will be deferred, as the priority now is to stimulate the economy and keep people employed. But the deficit will still be only 1.2% of GDP – we could allow for more, but I like to be prudent because of our high debt repayments.”
Given limited access to capital markets, he is actively discussing programme assistance with the multilateral agencies. “There are domestic market resources available, but we don’t want to crowd out the private sector,” says Mr Teves. “If we have support from Congress, we can rationalise taxes and revenue incentives, and use the savings to invest more in infrastructure.”
