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PhilippinesPhilippines’’ Experience in Conducting Experience in Conducting Coordination between Public Debt Coordination between Public Debt Management and Monetary PolicyManagement and Monetary Policy

Eduardo Sergio Gonzales Edeza

Treasurer of the Philippines

11 December 2003

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Presentation OutlinePresentation Outline

Directions on Monetary and Fiscal Policies

Relevant Laws Governing National Government Borrowings in Coordination with the Monetary Authority

Levels of Coordination

- Policy

- Implementation

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Directions of Monetary PolicyDirections of Monetary Policy

?Market and Structural Reforms

- Inflation targeting that has resulted in price stability, low interest rate regime, and a market-determined exchange rate system

?Fiscal Discipline

Fiscal prudence and keeping the fiscal program

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Directions of Monetary PolicyDirections of Monetary Policy?Further Strengthen the Financial System

-Improving risk management practices with the shift to forward-looking and risk-based framework

? Encourage merger of banks

? Institutionalize the Special Purpose Vehicle Act to help reduce the level of non-performing loans

? Review of disclosure requirements for banks

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Directions of Monetary PolicyDirections of Monetary Policy? Structural Reforms

- Thrust toward microfinancing

- Proposed amendments to the BSP and PDIC charters to improve supervisory powers

? Good Governance Measures

- Anti Money Laundering Measures

- Strengthened & aligned prudential standards with international norms for corporate governance

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Fiscal Policy DirectionsFiscal Policy Directions

? Fiscal discipline is a key element of the Philippine economic and fiscal program

?Streamlining of the tax system continues to be a priority particularly the passage of specific legislation concerning the following:

- Indexation of excise tax on tobacco and alcohol as well as petroleum products

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- Rationalization of documentary stamp taxes on financial transactions

? Introduction of new taxes on the more buoyant sectors of the economy

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?Pursue administrative and legislative reform measures to sustain growth in revenue collections and meet targets such as the NARA Bill and the conclusion of lifestyle checks at the BIR and BOC

?Continue the enhancement of capabilities of the Internal Revenue and Customs Bureaus especially through the use of IT

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Relevant Laws Governing National Relevant Laws Governing National Government Borrowings in Coordination Government Borrowings in Coordination with the Monetary Authoritywith the Monetary Authority

Republic Act 245 or an An Act Authorizing the Secretary of Finance to borrow to meet public expenditures authorized by law and for other purposes

(NG seeks full powers from the President after consultation with the Monetary Board on the impact on the monetary aggregates)

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Republic Act 1000 or an An Act Authorizing the President of the Philippines to issue bonds to finance public works and projects for economic development authorized by law and for other purposes

(Upon recommendation of the Secretary of Finance after consultation with the Monetary Board)

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Republic Act 7653 (Sections 117-129 and other sections related to fiscal functions) this pertains to the issue and placing of government securities, the support of the Bangko Sentral of the government securities market and its functions as the financial advisor as well as the official depository of the government

(RA 7653 is the New Central Bank Act)

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Policy Level of Coordination through the :Policy Level of Coordination through the :Development Budget Coordination Committee (DBCC)

- a vital institutional link between planning and budgeting in government,

- ensures the conformity and harmony of the Philippine annual budget with the country’s overall development plan

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Policy Level of Coordination through the :Policy Level of Coordination through the :

Development Budget Coordination Committee (DBCC)

- involves development planning in the principal fiscal and monetary agency in basic budgetary decision making and the Office of the President for oversight policy linkage and consistency

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Development Budget Coordination Committee (DBCC)

This is the venue wherein the National Government presents its borrowing program for approval after discussions on a technical level with the monetary counterparts as to the implication to their monetary policy

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Auction CommitteeThe Auction is being chaired by the Secretary of Finance and vice-chaired by the Treasurer of the Philippines with the Deputy Treasurers for Operations and Policy and Planning, and representatives from the Department of Finance, Bangko Sentral ng Pilipinas and Securities and Exchange Commission as members.

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Auction Committee

Auction Committee convenes at 1:00 P.M. and views the array of bids in the wide screen and deliberates on the yield and volume to be awarded

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Financial Programming and Monitoring Committee

The Committee is being chaired by the Bangko Sentral and the National Government, as member, reports the actual fiscal position and projections as well as its borrowing strategies

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Implementation Level of Coordination Implementation Level of Coordination

Securing Monetary Board approval for every issuance of government securities as to the impact to the monetary aggregates

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Implementation Level of Coordination Implementation Level of Coordination

Servicing and redemption of the public debt is being effected through the Bangko Sentral ng Pilipinas (The National Government coordinates with the BSP on the schedule of payment and fund sourcing)

Participation of the Bangko Sentral during the roadshow presentations whenever a foreign bond is being issued by the National Government

Website: www.treasury.gov.ph

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