Philippines' top banker does shuttle act to ease the foreign debt
Washington — Jose B. Fernandez has almost been living on an airplane since taking over Jan. 19 as governor of the Philippines Central Bank. He admits he has had to put ''on the back burner'' domestic financial issues to deal with the Philippines' foreign-debt crisis.
He and Cesar Virata, the prime minister, were here - almost a full day's flying time from Manila - last week to negotiate with the International Monetary Fund (IMF) on an austerity program as the condition for a $635 million loan. He expects an agreement with the fund ''sometime in late May or early June - unless some surprises come along.''
He has already been in New York three times to talk with commercial bankers about rescheduling a portion of their loans to his country. The bankers will not act until the IMF has given its blessing to a program aimed at restoring a better international-payments position to the Philippines. Altogether, the island nation owes almost $25 billion to foreigners, more than half to commercial banks.
In an interview, Mr. Fernandez would not specify details of the austerity program under negotiation. ''There will be the usual package of conditions,'' he said. ''It will be a hard year for the country.'' He predicts a 2 percent decline in output this year.
Reports from the Philippines allege that the conclusion of an IMF package has been delayed to avoid launching an austerity program immediately before an election for the National Assembly May 14.
Fernandez, former chairman of the Far East Bank & Trust Company, denies any political planning. ''I don't believe the election has much to do with the timing or the scale of the problem we have,'' he said. ''The election just happened to happen during our negotiations.''
Other sources indicate the reform package is likely to include a further devaluation of the peso (already devalued twice in the last year), a sharp cutback in the budget deficit (running at an extremely high 24 percent of gross domestic product), continued restraint on imports, credit limits, and a slowing of inflation (over 20 percent).
Mr. Fernandez and Mr. Virata are expected to discuss the various options in the austerity package with Philippine President Ferdinand Marcos on their return to Manila this week.
Talks with the IMF and with the commercial banks about rescheduling some $3.3 billion of debts began last November. Foreign financial institutions had already been holding back on short-term loans for financing trade or other business activities early in 1983. But the assassination of opposition leader Benigno Aquino Jr. Aug. 21 further weakened confidence among the foreign financial community.
Unlike Argentina, the Philippines has continued to pay interest on its commercial bank loans. So American banks have not had to take any losses on these loans. But the Philippines is now in the midst of a third 90-day moratorium, expiring in July, on repayment of principal of its loans.
Mr. Fernandez noted that the nation has succeeded in rebuilding its international reserves to about $900 million, from a low point of $290 million last October (according to IMF figures).
It has done this by cutting back on imports enough to give the nation a small positive balance of payments (current account) and by scrambling for bilateral loans to bridge the time until the IMF loan is approved and its debts rescheduled.
As a result of restrictions on foreign exchange and thus on imports, two automobile assembly plants (Ford and Toyota) have had to shut down, along with numerous other plants in such areas as appliances and building materials. But the government has continued to provide foreign currency to such ''sunrise'' industries as electronics and textiles which produce primarily for export. These are experiencing a ''boom,'' absorbing some of the labor laid off in other industries.