His Excellency Ferdinand E. Marcos
President of the Philippines
To the Nation
[Delivered on October 13, 1984]
Earlier today, in Washington, D. C., the Philippine government and the International Monetary Fund successfully concluded negotiations on the stand-by program. The letter of intent, which defines the country’s economic recovery program, was signed by Prime Minister Cesar Virata and Governor Jose Fernandez, Jr. and was accepted by the IMF.
This long-awaited event, as all should know by now, is of momentous significance to our efforts for economic recovery and stability. For nearly a year now, during which the nation has had to face severe economic difficulties and challenges because of the severe shortage of foreign exchange, we have been negotiating approval of this program at the same time that we were doing our utmost to cope with this time of travail. Now with the approval of the program, our recovery and stabilization efforts can proceed in earnest and we can all buckle down for the tasks at hand.
I want to take this opportunity tonight to acquaint our people with this propitious development, with the various elements of the recovery program, with the immediate steps that will be taken in line with it, and with their broad implications for the economy and the nation as a whole.
To begin with, I want to emphasize at once that what we have forged here with the IMF is a workable program that brightens our hopes for speedy economic recovery and brings us closer to sustained growth in the years ahead. As an immediate consequence of this agreement, we can now normalize our dealings with the international financial community. Immediately, too, this economic package binds us to the regorous implementation of various measures for economic recovery, which we made manifest in our letter of intent to the IMF.
In line with this agreement, the international monetary fund and the governments of the United States, Japan, and Korea have agreed to support us in all our efforts for recovery and stability.
With the IMF acceptance of our program, we are also able to finalize our negotiations with the commercial banks for the rescheduling of our commercial debt.
This commitment in support of our recovery efforts will enable us to normalize our foreign trade transactions and bring to an end the various foreign exchange restrictions and restrictions and all the attendant problems that we have undergone during the past year.
Our reciprocal commitment in this agreement is the vigorous and disciplined implementation of our program for economic recovery. As we have repeatedly stressed in recent months, this program must mean nothing less than our resolve to live as a nation within our means, to exercise financial discipline both in our public and private sectors, to bring to balance our exchange and payments position, and to refocus priorities in our national development efforts toward self-sufficiency.
To meet these objectives, we have already undertaken various measures to reduce the budget deficit starting this year, to control liquidity and inflation, to rein in the financial requirements of government corporations, and to channel resources into vital productivity sectors.
Today, in line with the approval of our economic recovery program by the IMF, I want to focus on immediate measures that we will undertake to implement the recovery program.
First, I want to announce the immediate lifting of all foreign exchange controls exercised by the Central Bank. The requirement for commercial banks to surrender their foreign exchange to the CB is fully eliminated. Importers may now go to their commercial banks to obtain their foreign exchange requirements. By the same token, requirement of CB approval for importations is also hereby lifted.
By this step, we therefore free again, after a lapse of almost one year, foreign exchange for trade flows. And the multiple exchange rate system heretofore in effect is abolished and the exchange rate is unified.
The immediate impact of floating the exchange rate will mean a slight depreciation of the peso vis a vis the dollar. This should not however result in drastic changes in price levels, because importers have already been utilizing the parallel market as their source of dollars at this same cost.
And neither do we foresee more than a slight devaluation of the peso, because we have seen in recent months a perceptible stabilization of the exchange rate in the official and parallel markets.
Second, in line with our recovery program, a substantial improvement in our tax performance is now imperative. The thrust of the revenue package, however, is a broadening of the tax base and an emphasis on greater efficiency in tax collection efforts. It does not focus on simply increasing tax rates, which results in the honest taxpayer paying more and the dishonest one getting away with more.
We have spared no effort in our painstaking search for measures that would entail the least sacrifice for the greater number, substitute measures now in place, distribute the tax burden more equitably, rely on the ability to pay and make enforcement more effective and even-handed. Our major effort has been directed at plugging tax loopholes.
Accordingly, a major portion of the revenue package consists of the removal of tax exemptions now enjoyed by government corporations and private enterprises, except those registered with the board of investments. Even the fuel oil purchases for domestic use by the Philippine Airlines and the purchases of the AFP Commissary will now be subject to tax. To be sure, many of the affected enterprises will present convincing arguments for the retention of their tax privileges. But at this time, I ask them to equally shoulder with the rest of our countrymen the task of economic recovery. Surely, better times will give us the opportunity to refine our fiscal incentives later.
In the area of tax enforcement, the lax collecting agencies must be strengthened and revitalized. We will continue as we must to rid these agencies of undesirables and scoundrels, and scoundrels, and we commit ourselves to fully support their legitimate needs. Hand in hand, we will institute administrative changes to be able to enforce vigorously, effectively, and promptly the tax laws, especially business and sales taxes. Administratively, simultaneous audit of income and business taxes under the present package audit system shall be abandoned to enable prompt review of returns under simplified audit procedures. We intend to prosecute to the fullest extent of the law tax evaders and other culprits.
These new measures underline the fact that economic recovery and the planned growth of national income depend critically on our determination to improve our tax effort. As we implement these measures, we shall continue to pursue our austerity program for government. We shall strive to further reduce expenditures at every turn.
Finally, I want to stress that this is a time for renewed vigor in our financial system, for total concentration on national economic priorities, and for greater exercise of national self-reliance.
Looking towards the rest of the year and beyond, it is clear that we must continue the difficult period of adjustment, even as we now normalize our dealings with the International Financial Community. There is no question that our economic recovery program includes measures that entail sacrifices from everyone, and from the nation as a whole.
But the rewards of all these burdens, if willingly borne and earnestly pursued, is the authentic stabilization of the national economy, the recovery of our economic momentum, and the renewal of growth.
Our economic recovery program, coupled with the support to be extended us by the IMF, is the basis for confidence that this time of travail for our country will pass, and that the time will soon come when we will have both full economic recovery and growth.
My countrymen, I would ask you to remember well tonight that for an entire year, prior to this agreement and in the face of so many difficulties facing the nation, we have demonstrated our resiliency and stability as a nation.
It is unthinkable that in the face of these new opportunities before us, we shall shirk the burdens and be unequal to the tasks at hand.
This is a moment for national confidence and resolution.
Together let us seize the moment and do all we can, contribute what we must, for the survival, the stability, and the prosperity of our land.
Thank you and good night.
Source: Presidential Museum and Library
Marcos, F. E. (1984). Speeches by President Ferdinand E. Marcos. [Manila] : Presidential Library.