Press Release
July 20, 2008

Review economic policies, Loren tells gov't

Senator Loren Legarda urged the government to review its economic policies in light of the surging inflation, which the Bangko Sentral ng Pilipinas expects to persist until the first quarter of 2009.

At the same time, Legarda commended the BSP's move to raise key interest rates by half a percentage point on Thursday to fight the 11.4 percent inflation, the highest since January 1999 when the country got hobbled by the Asian currency crisis.

"Since inflation is a global problem, our country will give off the impression that this economic trouble can be managed, thereby assuring potential investors that we are still worth investing into. And this is due to BSP's quick action," said Legarda, referring to the mitigating measures adopted by BSP relating to monetary policies which is usually the first line of defense against such instances.

While remaining positive that the BSP move will in effect encourage savings and reduce the liquidity of money in circulation, Legarda expressed apprehension that the debtors would be in a rather tight position, and so are the micro, small and medium enterprises (MSMEs), which accounts for 99 percent of total commercial and industrial establishments and employing 69% of labor force in the country.

"What the country is experiencing is not a simple downward fluke in the economic cycle, which, when not tended properly, could lead to a massive slump that may even surpass that of the late 1990s Asian financial crisis," Legarda warned.

With this, Legarda cautioned the government to look for sustainable solutions to avert the looming crisis, and prevent future problems while lessening the vulnerability of people from the negative economic shocks.

"We should explore alternatives and arrive at a compromise on the different proposals being brought forward. It should be a balancing act between welfare losses and fiscal stability," she said, referring to the proposals regarding taxation on petroleum products.

Legarda further stressed the need to invest more on technologies, particularly on renewable resources, which she viewed will equip the country and lessen its dependence on imported fuel.

"It is not the people's fault that we are heavily dependent on fossil fuel. It is because our technologies are still within this limitation, thereby making us all the more vulnerable to rising fuel costs," she added.

Aside from investment in research and development, Legarda urged the government to prioritize investments in agriculture, which remains to be underdeveloped; infrastructure, which still has to benefit the underserved areas, particularly in the countryside; and education, which, according to the lady Senator, is still one of the best tools in poverty alleviation.

The Senator, who earlier reacted on subsidies, proposed that the government should not employ subsidies that are dole-outs. Instead, she pushed for subsidies in health and education, which are more targeted and beneficial subsidies.

She also called on the public and the private sectors to make their shares in the national sacrifice in hard times, by cutting back on consumption of unnecessary goods and/or substitution of necessary goods with cheaper ones.

"Everybody should work hand-in-hand in curbing the effects of inflation. As they say: an extreme time calls for an extreme measures," she said

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