"Economic death" for the Philippines in two years without new taxes: Arroyo
MANILA, (AFP) - President Gloria Arroyo warned that the Philippines risked a "painful economic death" within two years unless taxes are raised to avert a feared debt default.
In a statement printed in the Philippine Star newspaper, she urged the country to "suffer the pain now and experience the gains two years hence (rather) than postpone the pain and die a painful economic death two years from now."
Popular opposition is posing a key stumbling block to Arroyo's bid to balance the national budget through increased taxes.
The eight-month budget deficit rose to 111.1 billion pesos (1.98 billion dollars) in August, compared to the full-year ceiling of 198 billion pesos or 4.2 percent of the gross domestic product (GDP), the finance department said Tuesday.
On Monday Fitch Ratings warned Manila of a potential sovereign credit downgrade if no tax measures were passed by year's end. Manila's government securities are now two notches below investment grade.
"The government cannot subsist on borrowed funds all the time ... (because) the interest payments will catch up with us," Arroyo said.
"If we remain in denial and refuse to take our situation seriously, the world may just impose the truth upon us. When that time comes, the Philippines would be the financial pariah of the world."
A survey by Manila-based Pulse Asia polling organisation last week found that 78 percent of Filipinos "see no need to impose new taxes as long as the government strengthens its tax collection efforts."
Arroyo said the government needed 180 billion pesos more in annual revenues to ease the burden on government debt, which she said stood at 71 percent of GDP -- the third highest in Asia.
She has asked Congress to pass a series of tax laws that would raise at least 80 billion pesos a year.
House of Representatives Speaker Jose de Venecia warned last week, however, that his colleagues were likely to pass only four bills this year and that the extra income would be up to 60 billion pesos short of the target.
Bear, Stearns and Co. analyst John Stuermer said recent sovereign issues by the Philippines showed it "still has fluid access to the capital markets and that press comments comparing the Philippines with Argentina are grossly exaggerated."
However, "the persistence of a budget deficit in a range of 4.0-5.0 percent of GDP is steadily raising the overall public sector debt burden and will make public debt management an increasingly difficult task without more meaningful fiscal reform."
Stuermer predicted that Arroyo would have a hard time getting reform measures passed by Congress despite winning a fresh mandate in the May presidential elections.
He also criticized her government for its reluctance to discuss its borrowing requirements "on a total public-sector basis" instead of just the requirements of the national government budget.
He estimated Manila's financing requirements this year at 3.3 billion dollars, including bonds issued by the loss-making state utility National Power Corp.
Arroyo said that while the economy grew at a respectable 6.2 percent clip in the first half and the government has not defaulted on its obligations, the situation "can deteriorate as fast as we are building our precious and hard-earned gains."
MANILA, (AFP) - President Gloria Arroyo warned that the Philippines risked a "painful economic death" within two years unless taxes are raised to avert a feared debt default.
In a statement printed in the Philippine Star newspaper, she urged the country to "suffer the pain now and experience the gains two years hence (rather) than postpone the pain and die a painful economic death two years from now."
Popular opposition is posing a key stumbling block to Arroyo's bid to balance the national budget through increased taxes.
The eight-month budget deficit rose to 111.1 billion pesos (1.98 billion dollars) in August, compared to the full-year ceiling of 198 billion pesos or 4.2 percent of the gross domestic product (GDP), the finance department said Tuesday.
On Monday Fitch Ratings warned Manila of a potential sovereign credit downgrade if no tax measures were passed by year's end. Manila's government securities are now two notches below investment grade.
"The government cannot subsist on borrowed funds all the time ... (because) the interest payments will catch up with us," Arroyo said.
"If we remain in denial and refuse to take our situation seriously, the world may just impose the truth upon us. When that time comes, the Philippines would be the financial pariah of the world."
A survey by Manila-based Pulse Asia polling organisation last week found that 78 percent of Filipinos "see no need to impose new taxes as long as the government strengthens its tax collection efforts."
Arroyo said the government needed 180 billion pesos more in annual revenues to ease the burden on government debt, which she said stood at 71 percent of GDP -- the third highest in Asia.
She has asked Congress to pass a series of tax laws that would raise at least 80 billion pesos a year.
House of Representatives Speaker Jose de Venecia warned last week, however, that his colleagues were likely to pass only four bills this year and that the extra income would be up to 60 billion pesos short of the target.
Bear, Stearns and Co. analyst John Stuermer said recent sovereign issues by the Philippines showed it "still has fluid access to the capital markets and that press comments comparing the Philippines with Argentina are grossly exaggerated."
However, "the persistence of a budget deficit in a range of 4.0-5.0 percent of GDP is steadily raising the overall public sector debt burden and will make public debt management an increasingly difficult task without more meaningful fiscal reform."
Stuermer predicted that Arroyo would have a hard time getting reform measures passed by Congress despite winning a fresh mandate in the May presidential elections.
He also criticized her government for its reluctance to discuss its borrowing requirements "on a total public-sector basis" instead of just the requirements of the national government budget.
He estimated Manila's financing requirements this year at 3.3 billion dollars, including bonds issued by the loss-making state utility National Power Corp.
Arroyo said that while the economy grew at a respectable 6.2 percent clip in the first half and the government has not defaulted on its obligations, the situation "can deteriorate as fast as we are building our precious and hard-earned gains."
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