IMF showers praises over policy response

The International Monetary Fund, or IMF, has commended the Philippine government's swift policy actions in response to global challenges, particularly the Marcos Jr. administration's "Medium-Term Fiscal Framework", or MTFF, and decisive monetary tightening.

The IMF highlighted the government's effective response to disrupted global markets, supply chain bottlenecks, and elevated inflation.

Contractionary monetary policy, characterized by interest rate hikes, and fiscal consolidation through the MTFF were lauded.

The MTFF aims to lower the debt-to-GDP ratio to 60 percent by 2025 and the deficit-to-GDP ratio to 3 percent by 2028.

The IMF is confident in the Philippines' ability to achieve its 2023 deficit target of 6.1 percent, even with increased spending in the second half.

The MTFF's dual function of complementing monetary policy and providing flexibility for future shocks was recognized.

Pandemic disruption response

The economy is projected to grow 6 to 6.5 percent over the medium term due to structural reforms like the Public-Private Partnership Code, Regional Comprehensive Economic Partnership and amendments to key laws.

IMF's key recommendations are:

• Explore setting the 60 percent debt ceiling as a fiscal anchor and the 3 percent deficit target as an operational one;

• Implement a more ambitious revenue mobilization strategy, including prioritizing tax measures like VAT on digital service providers, Package 4 of Comprehensive Tax Reform Program, and excise taxes;

• Address the Military and Uniformed Personnel Pension Bill and enhance oversight of GOCCs;

• Invest in capacity building for LGUs to facilitate fiscal decentralization; and

• Provide targeted support to vulnerable sectors to alleviate inflation, potentially expanding the Food Stamp Program and reducing tariffs on key food items.

Finance Secretary Benjamin Diokno expressed appreciation for the IMF's advice and highlighted its importance for sustainable development and economic stability.

This revision focuses on key points and achievements, uses more concise language, and avoids unnecessary repetition. It also clarified the purpose of the IMF's Article IV Mission and the benefits of such visits.