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Philippines, IMF Sign Policy Memo

March 17, 1998

MANILA, Philippines (AP) _ The government and the International Monetary Fund have settled on the economic conditions that would allow the Philippines to borrow up to $1.8 billion if needed.

The credit line would be used if the Philippines needed to respond to a worsening of the currency crisis that has hammered Asian economies since summer.

Central bank Governor Gabriel Singson said the IMF’s Executive Board is expected to review the conditions later this month. Final approval for the credit line will depend on the board’s decision.

Salvador Enriquez, the acting finance secretary, said the memorandum of understanding sets targets for economic growth of 3 percent to 4 percent this year, 4 percent to 5 percent next year and 6 percent in 2000. The inflation goals are 7.5 percent to 8.5 percent in 1998, 6 percent to 7 percent in 1999, and 5 percent in 2000.

The document also calls for an increase in the international currency reserves held by the central bank and for changes in banking regulations to strengthen the system.

Earlier, the central bank said the government has accepted an IMF proposal that would allow the currency, the peso, to float more freely by lifting a system of bands that curbs sharp fluctuations.

Last week, the central bank approved a new round of increases in the capitalization of banks operating in the country. It also speeded up implementation of a rule that would limit banks’ non-performing loans to 2 percent of their total loan portfolio. Banks need to comply with the limit by Oct. 1, 1999, a year earlier than scheduled.

The moves were part of the central bank’s efforts to strengthen the banking system and make it more resistant to shocks stemming from the regional financial crisis.

Singson said earlier that the IMF agreement would reassure investors of a continuity in economic polities despite presidential elections in May.

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