Philippines: 'pork barrel' projects vs. budget restraint

Philippine politicians have accused the International Monetary Fund, the ''poor nation's bank,'' of exerting undue influence on their economy. The barrage of criticism could jeopardize the career of Cesar Virata - the man who is implementing the budget cutbacks required by the IMF as a condition for granting a $500 million loan to the archipelago nation.

Mr. Virata, the Philippine prime minister who doubles as the country's finance minister, has offered his resignation because the controversy is so fierce. Philippine President Ferdinand Marcos rejected Virata's verbally offered resignation, but many observers think the prime minister's days in government are numbered.

Speculation about his replacement assumes great significance because Virata has wide respect both inside and outside the country, and at a level rarely enjoyed by Filipino government figures. His reputation as an honest technocrat and his independence from politicians have helped win that popularity.

When Mr. Virata came under fire from politicians in the Marcos Cabinet, anxiety ran high among foreign bankers and diplomats in Manila. A foreign banker says Virata's capability and integrity are key reasons why international banks continue to lend to the Philippines - now in dire need of loans - despite the country's unflattering credit rating.

''If Virata goes, it will be difficult for us to find another technocrat in whom we'll have the same degree of trust and confidence,'' he says.

The $550 million low-interest loan package from the IMF is expected to help the government tide over its chronic balance-of-payments deficit, which last year hit a record $1.1 billion, double the $560 million shortfall incurred in 1981.

In exchange for the loan, IMF has imposed drastic cuts on government spending. Last year's deficit was an estimated 14 billion pesos ($1.4 billion). The IMF has ordered the deficit to be cut to 9.4 billion pesos ($940 million) this year and to 9 billion pesos ($900 million) in 1984.

As in Latin American countries where spending controls imposed by the IMF may have contributed to politically explosive recession and unemployment, the Philippine budget cuts could apply a brake to the country's development momentum. That, at least, is what anti-IMF groups worry may occur.

In a recent closed-door meeting of the ruling New Society Movement, one party leader said that development efforts begun over the last several years may slow down.

''We are now waiting for all these efforts to fructify but because of IMF's strict conditionality, we find ourselves retrenching to a degree that will hurt us,'' he said.

At the same closed-door meeting, the Cabinet's economic experts, led by Virata, were castigated for not consulting the other Cabinet members on economic policies, including those related to multilateral institutions like IMF and the World Bank.

Repressing his anger over accusations that he had acquiesced too much to IMF conditions, Virata said, ''I hate all those comments because I am made to appear like a traitor to my own country.''

As to accusations that he failed to consult Cabinet members on economic policy, Virata said that the reduced budget was discussed both by the party and the National Assembly and was approved by President Marcos himself.

Observers say the factor that really may have triggered the attack on the IMF and Virata is the coming 1984 elections for members of the National Assembly. The budget cuts have placed constraints on spending for politicians' pet projects, which could adversely affect the ruling party's campaign position.

Virata said: ''We have an oncoming election and it is to be expected that some of our colleagues at the National Assembly will feel the jitters. They want an expansive budget but they cannot have that.''

One of the major government projects that suffered from the budget squeeze is the National Livelihood Program (known as KKK in the Filipino language). The program is designed to transform villages into self-reliant communities through establishment of small- and medium-scale projects. The projects would be managed by community residents. But the Livelihood plan is seen largely as a ''pork barrel'' for the dispersal of political patronage.

Last year, 1 billion pesos ($100 million) were allocated for the program, but to date only 300 million pesos have been released. Outraged by the funding cuts, President Marcos's wife, Imelda, who is minister of human settlements and coordinator of the KKK program, said: ''We cannot be efficient because somewhere along the line, in the ministries or in the Cabinet, we are tied around the neck. We hope that this oppressive atmosphere will be lessened because we are facing an election next year.''

Although Virata may be annoyed by the continuing tirade against him, he seems unperturbed about his future. ''I am expendable. If my performance is bad, I do not deserve to be in government,'' he said.

The factor that may stop President Marcos from replacing Virata at this time is the prime minister's position as ''good collateral'' with international lenders. At least in the short term, the Philippines must rely heavily on foreign loans to sustain its development program and it may help if Virata is at the financial helm.

However, pressure from politicians is strong and political observers are watching the coming July opening of the National Assembly's regular session.

If Marcos buckles under the pressure, the Philippines technocrat-prime minister may be giving way to a seasoned and acute politician.