IMF & Bank Clips 9/9/98 (fwd)

[Robert Weissman <rob@essential.org>]

>From Environmental Media Services:

CONTENTS:

--  LIVINGSTON: SIZE OF IMF FUNDING PACKAGE IN FLUX
--  SUMMERS: OPEN CAPITAL ACCTS NEED STRONG FIN. SUPERVISION
--  SEN. STEVENS URGES HOUSE TO ACT ON $18B IMF FUNDING THIS WK
--  WORLD BANK: CAN'T CONFIRM, DENY, WHETHER INVITED TO G-7
--  IFC CHIEF SEES MORE LOAN DEMAND CAUSED BY GLOBAL MKT TUMOIL
--  ADB SAYS IMF HIGH RATE POLICY IN INDONESIA SQUEEZING COS
--  LATIN AMERICAN GOVTS TURNING FISCAL, MONETARY SCREWS
--  ECUADOR'S JARAMILLO: GOVT PLANS TO CUT SPENDING; NO DETAILS
--  S. KOREA REFUTES REPORTS OF WORLD BK $2BN LOAN REFUSAL
--  PHILIPPINES PLANS TO DRAW $260 MLN FROM IMF LOAN BY YR-END
______________________________________________________________

Dow Jones Newswires -- September 9, 1998

LIVINGSTON: SIZE OF IMF FUNDING PACKAGE IN FLUX
Dow Jones Newswires
By Jennifer Corbett Dooren and Mark H. Anderson

 WASHINGTON (Dow Jones)--U.S. House leaders said Wednesday they don't
expect to resolve differences on the size of a funding package for the
International Monetary Fund until later in the year.

 "It's still in a state of flux," House Appropriations Chairman Bob
Livingston, R-La., said.

 Livingston's committee is scheduled to consider an IMF funding package
Thursday as part of a foreign operations spending bill for fiscal 1999.
 The Senate last week approved an $18 billion funding package for the IMF.

 House leaders, however, currently only have $3.5 billion slated for the
IMF. The struggle over IMF funding had pitted House leaders against each
other. House Majority Leader Richard Armey, R-Texas, has been strongly
opposed to funding the IMF without attaching conditions that require the
IMF to reform its policies and practices while Livingston had supported the
full $18 billion.

 But in the wake of the Russian financial crisis Livingston has started to
reconsider his support of the full funding package. In July the IMF pledged
an additional $22 billion in aid to Russia on top of an existing $9.2
billion credit arrangement. Since then the Russian economy has continued to
worsen.

 "I think the money they've (IMF) spent has not been well spent,"
Livingston said.

 Livingston said he isn't sure if his committee will approve the $3.5
billion or will agree to the full $18 billion.

 But it's more likely, he said, that agreement on the exact amount for the
IMF won't come until the very end of the congressional session in October.

 House Speaker Newt Gingrich, R-Georgia, said the financial problems facing
various parts of the world "demand a pretty high degree of accountability
from the IMF."

 Gingrich and Livingston made their comments after attending a meeting with
former Republican officials such as former Secretary of State George
Shultz. Gingrich said the group of former officials updated returning
lawmakers on the world events that took place during the August recess.

 Funding for the IMF has been controversial in the House since the Clinton
administration asked Congress earlier this year to replenish IMF coffers
following economic bailouts in Asia and Russia. Of the funds, $3.5 billion
would be for loan guarantees and $14.5 billion for reserves.

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 9, 1998
SUMMERS: OPEN CAPITAL ACCTS NEED STRONG FIN. SUPERVISION
Dow Jones Newswires

 WASHINGTON -- U.S. Deputy Treasury Secretary Lawrence Summers warned
crisis-hit Asian economies Wednesday not to draw the wrong lesson about
free-market capitalism, saying countries that turn their backs on the
international financial system hurt their own citizens "most of all."

 "It would be a catastrophe if countries were to develop the idea that
somehow withdrawing from the global system was right and that building the
foundation for a market economy was wrong," Summers said in a speech to
bankers and government officials from 62 countries.

 Although Summers didn't mention it by name, Malaysia has taken the most
drastic step of any crisis-stricken economy to withdraw from the global
financial system.

 Malaysian Prime Minister Mahathir Mohamad, asserting that the "free market
has failed disastrously," said last week his country would no longer allow
its currency to trade outside its borders. Many Southeast Asian countries
blame their troubles on foreign speculators who invested too rapidly in
those countries and then withdrew their money even more rapidly.

 Russia has unilaterally declared a halt to repaying some of its foreign
debts, and even usually free-market Hong Kong has been intervening heavily
to prop up stock prices in that country.

 "Countries that choose to embrace unilateral action as a substitute for
reform and cooperation hurt the world system and, by severing ties to world
markets, hurt the prospects of their own citizens most of all," Summers
said. He spoke at a conference on bank-deposit insurance organized by the
U.S. Federal Deposit Insurance Corp.

 The Asian economic crisis has sparked a growing debate over whether many
developing countries were ill-advised by the International Monetary Fund,
which urged them to permit free capital flows.

 The IMF's stance, Former Federal Reserve Chairman Paul Volcker has
contended, was influenced by the U.S. Treasury and left many small
economies dangerously exposed to turbulent capital flows. "The visual image
of a vast sea of liquid capital strikes me as apt," Volcker said in April.
"The big and inevitable storms through which a great liner like the U.S.S.
United States of America can safely sail will surely capsize even the
sturdiest South Pacific canoe."

 Summers said Wednesday that free capital flows in countries that do not
have strong financial-supervision systems can be a dangerous thing. "We
have seen in recent months in Asia... the danger of opening the capital
account when incentives are distorted and domestic regulation and
supervision is inadequate," he said. But the proper response to the danger
should be to strengthen supervision systems rather than curb capital flows.

 "Let me be very clear about this," Summers said. "Inflows in search of
fairly valued economic opportunities are one thing and a good thing.
Inflows in search of government guarantees under the belief that they are
immune from standard risk are quite another."

 Banks in many crisis-hit Asian economies lacked strong deposit-insurance
programs but instead enjoyed implicit government guarantees that they would
not be allowed to fail. That contributed to a system of perverse
incentives, Summers said. "The lessons we learned are that implicit
guarantees...have the effect of encouraging too much lending" when times
are good and too little when times are bad, he said.

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.


++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 8, 1998
SEN. STEVENS URGES HOUSE TO ACT ON $18B IMF FUNDING THIS WK
Dow Jones Newswires

 WASHINGTON -- Senate Appropriations Chairman Ted Stevens, citing low
commodities prices, Tuesday urged the House to act quickly on the entire
$18 billion in funding pending for the International Monetary Fund.

 The Senate last week passed the funding package for the second time.
However, House leaders have repeatedly put off action this year on the
controversial issue. A key House committee has scheduled a vote on the
funding for this Thursday.

 "We have got to take action to ensure that farm prices are supported as
soon as possible," Stevens, R-Alaska, said. "I don't see how we can afford
not to" provide the requested IMF funds.

 The money was requested by the Clinton administration last year to
replenish IMF coffers following economic bailouts in Asia and Russia. Of
the funds, $3.5 billion would be for loan guarantees and $14.5 billion for
reserves.

 Stevens has long supported the IMF funding requests, in part because of
concern for the fate of U.S. exports such as agricultural products.

 Top leaders in the House have been sharply divided on IMF funding,
however. House Majority Leader Richard Armey, R-Texas, has been a chief
critic, arguing for major reforms at the 182-country organization before
any funding is provided.

 The House Appropriations Committee will take up the measure on Thursday as
part of a larger foreign operations spending measure but may only approve
$3.5 billion of the funds.

 Farm-state lawmakers were pressuring the appropriations committee to
approve the entire package for the same reasons cited by Stevens. A a
recent round of difficulties in Asia has cast additional doubt on whether
the House will add the remaining $14.5 billion at this point.

 After the appropriations panel acts, the full House will have to vote on
the issue before the House and Senate can reconcile differences between the
two bills. Stevens has said the Senate will fight for full funding of the
IMF request, but final negotiations may not occur until the final days of
the 1998 session of Congress this October.

    -By Mark H. Anderson;202-862-9230

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 8, 1998
WORLD BANK: CAN'T CONFIRM, DENY, WHETHER INVITED TO G-7
Dow Jones Newswires

 WASHINGTON -- A World Bank spokeswoman said Tuesday she could neither
confirm nor deny whether the World Bank has been invited to the expected
meeting of the Group of Seven (G-7) industrialized nations Monday.

 The World Bank is at times invited to participate in meetings of the G-7,
which includes Canada, France, Germany, Italy, Japan, the U.K. and the U.S.

 But in this case, the Bank declined to comment on whether the meeting is
even taking place.

 Earlier Tuesday, the U.K. Foreign Office announced a meeting of senior
foreign and finance ministry officials from the G-7 would likely take place
next Monday to discuss Russia's financial crisis. The Foreign Office said
the meeting will be attended by senior officials from the European
Commission, the European Union presidency - currently held by Austria - the
International Monetary Fund (IMF), and the World Bank.

 The IMF also declined to comment on the meeting at this time. The
institution is referring inquiries on the matter to the U.K. government.

 While officially the international agencies are keeping quiet on their
prospective attendance, their participation would not seem out of the
ordinary, given the world financial climate, particularly with the
meeting's focus on Russia.

 Both institutions have a great deal at stake in Russia.

 In July, the Bank approved a $1.5 billion loan for economic restructuring
to Russia, the largest-ever made by the agency to Russia. It was part of a
$22.6 billion lending package from the IMF, the World Bank and Japanese
government - also announced in July.

 The World Bank's total commitments to Russia, which became a Bank member
in 1992, amounted to $11.4 billion for 41 projects as of the beginning of
August, including the $1.5 billion July loan.

 The IMF also approved $11.2 billion in extra emergency credits for Russia
in July, including an immediate outlay of $4.8 billion. Another $4.3
billion tranche of IMF support was scheduled to be released in September,
although that money is now up in the air.

 -By Kristi Bahrenburg, tel: (202) 862-9295; or e-mail:
 kristi.bahrenburg@cor.dowjones.com

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 9, 1998
 IFC CHIEF SEES MORE LOAN DEMAND CAUSED BY GLOBAL MKT TUMOIL
 Dow Jones Newswires

 BUDAPEST -- The International Finance Corp. expects to see more demand for
its loans and investments due to the current turmoil in world markets, IFC
Executive Vice President Jannik Lindbaek said Wednesday.

 "It's not just business as usual, it's more business than usual," Lindbaek
said to reporters prior to the start of the IFC's annual two-day advisory
council meeting in Budapest, the first such meeting to be held outside
Washington, where the IFC maintains its headquarters.

 The IFC is the private-sector financing arm of the World Bank. Lindbaek is
the top official employed full-time at the IFC.

 Lindbaek pointed to South Korea as an example of a country the IFC has
recently re-entered to help support its private sector at a time when the
South Korean economy, like that of many of its Asian neighbors, is reeling.

 With Russia's economy teetering on collapse, the IFC expects to see
increased demand in Europe for its role as a catalyst in generating
private-sector financing, said Harold Rosen, the IFC's director of Central
and Southern Europe.

 The IFC invests about $800 million s year in Europe -outside of Russia,
representing about one-fourth of the bank's new projects, Rosen noted.

 In Hungary, the host nation for the meeting, the IFC is considering
financing for bus maker Ikarus Rt. Rosen declined to give details about the
potential loan. He also declined to say whether the IFC is considering a
loan for Hungary's troubled Postabank Rt., which the government
re-nationalized in May via a capital injection.

 -By Jack Grone; 361-267-0622; jgrone@ap.org
Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.


++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 9, 1998

ADB SAYS IMF HIGH RATE POLICY IN INDONESIA SQUEEZING COS
By GRAINNE MCCARTHY, 
Dow Jones Newswires

 JAKARTA -- International Monetary Fund-prescribed high interest rates to
boost the rupiah may be doing the Indonesian economy more harm than good, a
senior Asian Development Bank official said Wednesday.

 Shoji Nishimoto, ADB director of programs for East Asia, said while the
merits of keeping rates high in order to attract investors to buy rupiah
were evident, this doesn't make up for the devastating knock-on effect on
Indonesian companies.

 "You want to defend the exchange rate and at the same time the corporate
sector is dying and short of liquidity," Nishimoto told Dow Jones Newswires
in an interview.

 He said the crises that have rocked Asian economies have challenged the
IMF's traditional strict monetary policy mantra.

 "I think (the IMF) is a very unique institution with highly trained
competent professionals and also they deliver, they deliver fast," he said.
"But then they operate from Washington and typically deal with G-7
shareholders, some of whom are pure, firm believers of high interest rates
and fiscal balance. In the area of crisis management and the recovery path,
I think there is room for some modification of that."

 Interest rates for one-month central bank paper are currently running at
around 70%, while rates for lower maturities range between 40% and 65%.
While the high rates have managed to provide some support to the rupiah,
businesses complain of the drastic impact they have on the real economy.

 "High rates in the short term work in many countries," Nishimoto said. "It's
 only when you combine that with huge inflows and outflows of capital,
confidence in international markets, then it's a different matter and you
can't keep high interest rates when money moves around like that."

 The IMF - and the government - have said interest rates should remain high
to support the rupiah, which has lost over 80% of its value since the
currency crisis hit the region last year. Nishimoto said the likelihood of
Indonesia easing rates now was unlikely however, noting that with inflation
running at around 70%, real interest rates aren't that high in comparison.
This didn't lessen the quandary, however.

 "It's a dilemma," he said. "For a real businessman it's a logic hard to
understand."

 Implementing capital controls, as has happened in neighboring Malaysia,
isn't an option either to control the movement of funds, Nishimoto said,
noting that Indonesia as an IMF patient is unlikely to introduce any such
measures. Given the sprawling nature of the country and its myriad of
islands, Indonesia wouldn't practically be in a position to enforce capital
controls in any case, he said.

 Nishimoto is in Jakarta to review the ADB's assistance program for
Indonesia and liaise with the IMF on the overall state of the country's
economic reforms. The Manila-based bank has released $550 million so far of
the $3.0 billion loan which will be disbursed to Indonesia through the year
2000 to strengthen financial "governance."

 Nishimoto is particularly looking at Indonesia's progress in ADB-financed
programs in order to give the green light for the next $500 million
installment.

 He said he is broadly satisfied, although the government is lagging behind
on some commitments, particularly on writing up new rules define capital
requirements of securities firms and establishing a clearing a settlement
system.

 "I think the conditions are substantially met, but one or two aren't,"
Nishimoto said. "We can most likely release the money around the middle of
October."

 The real test in reforming the financial sector will be for Indonesia to
turn around its ailing banks, not least the ones the government has brought
under its own control, the ADB official said.

 Having long appeared dormant on bank restructuring, the government last
month closed three large private banks, nationalized four others and
pledged to merge four state banks with a view to eventual privatization. As
part of this, the government also gave bankers until Sep. 21 to repay funds
injected to them by the central bank, much of which were misused.

 "The test is really how to restructure these banks. It's easy to close and
nationalize them, the issue is more how to use public funds to restructure
them," Nishimoto said. "I think that will be a very challenging job."

 The government - and the ADB and other international financial
institutions - has to focus on turning around the healthy banks and be
tough with those that don't merit being saved, he said.

 "We're in the emergency front line hospital and if we see soldiers coming
back with one leg missing, we have to tell them you can't go back,"
Nishimoto said. "If someone comes with just a bullet, you fix it up and
send them back."

 Indeed, beyond the problem of how the government will force debtors to
settle their debts to the state, the sheer number of banks in Indonesia
looms as a major challenge. In the last decade, the number has risen from a
handful to more than 200, stretching the ability of the finance minister to
properly supervise.

 The ADB is also helping to finance audits of banks in order to separate
the dying from the walking wounded.

 Nishimoto conceded that restructuring Indonesia's banking and corporate
sectors however, would have little effect unless it is accompanied by an
onslaught on corruption. The World Bank has come under fire for allegedly
allowing corruption at its development projects here and has pledged to
tighten independent controls of its spending, something which Nishimoto
echoed.

 "The World Bank and ADB will push ahead with policy-based anti-corruption
measures to reduce rent-seeking in our development aid," he said.

 Having said that, the ADB official noted that steering clear of corruption
in Indonesia was next to impossible.

 "It's like walking in a field of mud wearing a white tuxedo, you can't
expect to stay clean," he said. "Until the entire society wakes up and uses
social sanctions against misuses of funds, there's going to be mud."

 -By Grainne McCarthy; 6221 350 01 45; gmccarthy@ap.org

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.


++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 8, 1998
LATIN AMERICAN GOVTS TURNING FISCAL, MONETARY SCREWS
By THOMAS CATAN and MARY MILLIKEN
 Dow Jones Newswires

 NEW YORK -- After making lofty promises of fiscal and monetary rectitude
to the International Monetary Fund last week, Latin American governments
are moving to back their words with deeds.

 The Brazilian government Tuesday announced fiscal austerity measures,
including budget cuts of 4 billion reals or 4% of total expenditures, the
creation of a fiscal control commission, and an "immediate brake" on
overspending.

 Ecuador's new government promised to follow suit with measures to cut
spending and raise more tax revenue, but Finance Minister Fidel Jaramillo
declined to give further details on his plans. The full fiscal package is
expected to be announced sometime this month.

 The Peruvian and Chilean central banks, meanwhile, late Monday altered
minimum reserve requirements in an effort to alleviate pressure on their
currencies and calm their foreign exchange markets.

 And Venezuela before the weekend announced another $160 million in
spending reductions, bringing its total cuts this year to over $4.5 billion.

 Despite their efforts, which followed a meeting late last week in
Washington between Latin American finance ministers, central bankers and
the IMF, analysts say the region's main economies have further to go.

 Tuesday's measures by Brazil are "largely cosmetic," said Graham Stock,
vice president of Latin American research at Chase Securities, adding that
Brazil and Venezuela will have to announce further fiscal reforms after
elections later this year.

 "Latin America is in an ongoing process of fiscal adjustment," Stock said,
as countries adapt to falling oil revenues, slower growth and tighter
credit markets abroad. "Certainly after the elections, we will have to see
a concerted effort at fiscal reform and a possible further tightening of
monetary policy."

 "The Brazilian measures are very limited in scope," said Javier Kulesz, an
emerging markets analyst at BankBoston. "What the government wants to do is
send the right signal to the markets, but this is not going to solve
anything."

 Others said that Brazilian President Fernando Henrique Cardoso, who's up
for reelection on Oct. 4, is doing the best he can.

 "The market was wanting something unviable and what the government did was
make a viable proposal," said Dalton Gardiman, economist at Deutsche Morgan
Grenfell in Sao Paulo.

 Gardiman predicts that the measures will be enough to offset the increase
in debt servicing costs due to the tightening in credit that goes into
effect Tuesday.

 "It's not going to improve the public deficit," Gardiman said. "But we
can't afford to put up with a larger public deficit because it's already
too high."

 Brazil's public deficit stands at 7% of gross domestic product. Also
Tuesday, the government vowed to draw up a three-year deficit reduction
plan to send to Congress by Nov. 15.

 In terms of the 1999 budget, which was sent to Congress last week, the
government hasn't made any specific cutbacks. But it is empowered to limit
spending in the future to ensure a primary budgetary surplus of 8.7 billion
reals (BRL) ($1=BRL1.7) in 1999, up from a surplus of BRL5.0 billion for
1998. The primary balance excludes debt servicing.

 "We already thought the 1998 and 1999 budget forecasts were optimistic and
what the government did was guarantee them," said Jaime Alves Neto,
economist at Sao Paulo's Banco Patente. "If it manages to meet them, then
it will be an accomplishment."

 Alves Neto believes the government doesn't have much credibility in
cutting expenditure, judging by the results of its November 1997 fiscal
package, implemented to stop a run on the currency. "The government only
met objectives on the revenue side," he said, in reference to the tax
increases in the November package.

 On whether other measures can be expected this week, economists said the
behavior of capital outflows will be the deciding factor.

 "We have to wait some days to see if the capital outflows lessen," said
Gardiman. "Measures are possible, but I don't know what they would be."

 Alves Neto said that if the net outflow falls below around $300 million
daily, no more measures will be needed.

 On Friday, Brazil's foreign exchange market showed a net dollar outflow
$2.93 billion, bringing the total net outflow in the first week of
September to $6.74 billion. Late Friday, the Central Bank announced a move
to tighten credit on the local market and stem the outflow of funds.


 -By Thomas Catan; 201-938-2225; thomas.catan@cor.dowjones.com
 and Mary Milliken; 5511-815-2271; mmilliken@ap.org

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 8, 1998
ECUADOR'S JARAMILLO: GOVT PLANS TO CUT SPENDING; NO DETAILS
Dow Jones Newswires

 QUITO -- The Ecuadorean government is planning to adopt a strict program
to control public expenditures and raise tax collection, in order to deal
with the impact of the global turmoil and the scarcity of capital, Finance
Minister Fidel Jaramillo said Tuesday.

 "The country needs fiscal, monetary and financial discipline," Jaramillo
said at a press conference. "The government economic plan is being laid out
although there is no date or deadline for when it will be announced."

 The official ruled out that a currency devaluation would be included in
the plan, "since the 7.5% adjustment in March was enough." Ecuador devalued
its currency, the sucre, by 7.5% in March.

 The minister said the government - which took office in early August - has
revised its economic targets for 1998. Ecuador's gross domestic product is
expected to expand 1.5% to 2.0%, while the fiscal deficit at year-end is
seen between 4% to 5% of GDP, he said.

 Jaramillo said the upcoming reforms, which will be formulated together
with the Central Bank, will also include the refinancing of Ecuador's
foreign debt, which currently stands around $15 billion.

 Jaramillo said that for debt owed to the private sector, the government is
planning to carry out debt swaps, buy-backs and new offerings on
international markets.

 For borrowings with multilateral lenders, particularly the World Bank and
Inter-American Development Bank, Jaramillo said the government will
refinance its credits.

 And for funds owed to other governments, Ecuador will repay loans
according to its ability, under the umbrella of the Paris Club.

 He stressed that Ecuador won't default on any of its foreign debt.

 Jaramillo said World Bank and IDB officials will travel to Ecuador in
about two weeks to oversee the credit programs.

 -By Mercedes Alvaro; 5939-728653; malvaro@ap.org

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.

 
++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 9, 1998
 S. KOREA REFUTES REPORTS OF WORLD BK $2BN LOAN REFUSAL
 Dow Jones Newswires

 SEOUL -- South Korea's Ministry of Finance and Economy refuted Wednesday
local press reports that the World Bank had threatened to cancel $2 billion
in loans if the country provides preferential loans to major conglomerates
for restructuring.

 Local press said the World Bank told Korea that it would reconsider the $2
billion, which is scheduled to be delivered to South Korea this year, if
the country provides preferential financial aid to five leading
conglomerates for their restructuring.

 "The government and the (World Bank) haven't discussed the linking of the
loans to the restructuring of five conglomerates," the ministry said in a
brief statement.

 The World Bank is providing to South Korea a total of $10 billion under a
$58.35 billion bailout aid arranged by the International Monetary Fund
(IMF) late last year.

 South Korea's five major conglomerates including Samsung Group (q.ssn) and
Hyundai Group (q.hgp) announced last week much-waited restructuring plans
for seven industries. The industries are aerospace, train manufacturing,
power plant, oil refinery, cars, petrochemical, and trains.

 In return for the restructuring, the conglomerates are calling for
government financial aid and tax breaks.

 -By Chang Woo-hyuk; 822-732-2165; whchang@ap.org

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.


++++++++++++++++++++++++++++++++++++++

Dow Jones Newswires -- September 9, 1998
PHILIPPINES PLANS TO DRAW $260 MLN FROM IMF LOAN BY YR-END
Dow Jones Newswires

 MANILA -- The Philippine Central Bank said Wednesday it plans to draw some
$260 million from a $1.37 billion precautionary loan arrangement with the
International Monetary Fund (IMF) by the end of the year.

 At a news conference, Philippine central bank Governor Gabriel Singson
said the go-ahead to draw these funds still has to be given by the IMF's
board in Washington.

 After over two weeks of talks, the government and the IMF have finalized
new economic and fiscal targets for 1998 and the coming year. The targets
are part of the conditions the IMF has set for the central bank to tap the
loan to boost its foreign reserves.

 In a joint communique from the IMF and central bank, it was noted that the
Philippine government regards the loan merely as a precautionary arrangement.

 "However, in light of the renewed pressure on the external sector, they
have decided to activate the stand-by arrangement subject to approval...by
the IMF's board," the statement said.

 Singson elaborated by saying this was due to "uncertainties" in world
markets.

 When the loan was granted in April, the central bank said it would be used
mainly as a war chest to repel "extreme" speculative attacks on the peso
(PHP).

 The past months have seen sporadic bouts of volatility in the peso
triggered mainly be falls in the Japanese yen and fears of a devaluation in
the Chinese yuan.

 The central bank has repeatedly said that adjustments in its overnight
interest rates would remain its main defense to quell currency volatility.
 Singson also reiterated that the Philippines wouldn't follow Malaysia lead
by imposing capital controls as a means of easing pressures on the market.

 The precautionary loan has less stringent conditions attached to it than
for full borrowing programs, such as the IMF's bailouts for Indonesia and
Thailand.

 The Philippines was the IMF's first patient in Asia, but exited earlier
this year from over three decades of full borrowing programs and close
supervision.

 At present, the government intends to access some $1 billion in loans from
various multilateral and bilateral sources to fund numerous projects and
reforms.

 -By Alastair McIndoe: 00632 892-5590 amcindoe@ap.org

Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.