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Philippines case worth studying

24th February 2012
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Editorial Cartoon

The Philippines, once one of the world poorest countries has made miraculous about turn. It has become a lender to the International Monetary Fund (IMF) instead of one of the borrowers most poor countries are.

What is more interesting about this Far East Asian economy is that the money it lends to the IMF eventually goes to the crisis ridden countries of Europe - Ireland, Portugal and Greece  to help them redress economically.

How this incredible turn of events came about is not only fascinating, but something that ought to be studied and above all, emulated.

How did it happen? It only occurred when the Filipinos expanded their foreign exchange reserves and growing balance of payments (BoP) surplus for the IMF’s long-standing member.

According to the Philippines Central bank governor, Amando Tetangco Jr, the build-up in the reserves was due mainly to foreign exchange inflows from the deposits by the national government from its dollar-denominated 25-year global bond issuance as well as dollar remittances from overseas Filipino workers and earnings from Philippine businesses abroad.

Early last month, the Philippines sold USD1.5bn worth of dollar-denominated bonds due in 2037.

It also expects the sum of all foreign exchange flowing into the country to hit a record level of USD79bn this year.

The central bank said in January that the country registered a BoP surplus of USD864m-- as it continued to enjoy inflows from the usual sources of foreign currencies, such as remittances and portfolio investments.

We have until very recently known the Philippines as a country of severe monsoon floods, religious extremism associated with unending threats and constant state of instability arising from corrupt leaders.

The small archipelagoes in their thousands have very limited resources and opportunities besides the fact that even the land for tilling let alone to live in is a scarce resource.

This Philippine page on how it has managed to transit from an IMF long time net borrower to a net lender within a short period is not only pertinent to Tanzania but an example worth emulating.

Tanzania is already implementing similar economic programmes that the Far East Asian country embarked on earlier before it turned into a net lender of the IMF in 2010.

A couple of years ago the government invited Tanzanians in the Diaspora to remit their money home and plough them into the economy in a move to boost its prosperity.

The government has started taking measures to issue an USD500m bond in a move to raise money in order to spur economic growth.

We believed that should Tanzania follow through on such a credit strengthening paradigm, it would work well on her part.

Tanzania could do even better if she wanted to become a net creditor member of the IMF, moving from its current position of net borrowing because she has more resources than the Philippines.

Tanzania almost ranks second or third after the DR Congo and Angola in terms of resources in Africa, with the former’s standing at almost the combined GDPs of Europe and the US.

SOURCE: THE GUARDIAN
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