Philippine deal with creditors gives Aquino economic breather. Pact reduces Manila's interest by $1 billion over next 17 years

A new agreement on the Philippines' foreign debt adds another swash of color to the country's economic rainbow. The financing deal gives elbow room to an economy that has been expanding at a rapid clip in the year since President Corazon Aquino came to power. The pact with foreign creditors, reached last week, allows the fifth-largest debtor nation in the third world to save at least $1 billion in interest payments over the next 17 years. With such boosts to the economy, Mrs. Aquino can more easily curtail a communist insurgency and help her candidates in May 11 elections for Congress.

Economists in Manila differ widely on how fast the economy is growing, mainly because so many changes have hit the Philippines in the last year. The economy grew 3.2 percent in the last quarter of 1986. The government's official estimate for this year is 6.5 percent growth. Other estimates vary from 3 percent to a booming 8 percent. The uncertainty is due in part to the unknown size of a large underground economy that developed during a recession from 1983 to mid-'86.

The most immediate economic change since former President Ferdinand Marcos fled has been the absence of so-called Marcos ``cronies.'' Their practices resulted in at least 3 percent of the gross national product leaving the country each year, by one economist's estimate.

Aquino is also the beneficiary of a sudden rise in the world price of the nation's main crop, coconuts, which affects at least a quarter of all Filipinos.

Foreign donors, such as the United States and the World Bank, have also chipped in with sizeable aid and loans, helping reduce its budget deficit and launch new rural projects. The International Monetary Fund granted $505 million in standby credits and gave better terms on $870 million in debt.

In addition, political stability has created a booming stock market and helped stabilize the currency and kept inflation low. Labor strikes are under control. A new tax code and a cleanup of government budget procedures have improved investor confidence. Manila tried to pump up a dormant economy last year by allocating $400 million for housing, road, and water projects, to spur consumer demand.

Aquino has also sought - with limited success - to reclaim the ``ill-gotton wealth'' of Mr. Marcos and his cronies and to sell off profitless companies granted special government favors under Marcos.

Despite a rosy picture for 1987, the long-term is uncertain. Foreign investment has not rushed in, and traditional export crops face grim prospects.

Like many other Asian nations that have adopted an export-led economic plan in the past and now face hostile global economic conditions, the Philippines is looking to its domestic market as the engine for growth. With 56 million people and many material resources, the country is seen as having an advantage over smaller Asian nations.

Still, the Philippines is saddled with meeting foreign-debt payments for years, forcing planners to boost export earnings to gain dollars. That pressure has led the government to seek an additional $7 billion dollars in new loans to promote growth and restructure the economy.

The new debt-scheduling agreement will reduce the percent of export earnings used to repay foreign loans from 35 percent to below 30, foreign bank representatives say. To obtain the deal, the Philippines was forced to start paying principle on its foreign commercial loans, which it had stopped doing in 1983. The plan still must be sold to more than 400 creditors.

The agreement, which dealt with $13.2 billion of the total foreign debt, contains an option for the banks which essentially allows them to sell their debt as pesos to investors who would then be required to put the money into new businesses here. Known as PINs (Philippine Investment Notes), the plan would give a higher interest rate to the banks while boosting the nation's economy. Finance Secretary Jaime Ongpin originally wanted this as a mandatory part of the agreement.

The Philippines also failed to get the same low interest rate given Mexico recently by foreign creditors, but Mr. Ongpin is hoping the PIN plans will effectively reduce the nation's debt.

The deal, announced March 28, came after pressure on the banks from the Reagan administration, which strongly supports Aquino. The Philippines will pay seven-eigths of a percentage point above the London interbank offered rate on the refinanced debt as long as interest payments are current.

Economy at a glance Official Philippine government prediction for 1987: 6.5 percent economic growth. Range of other estimates: 3 to 8 percent. Uncertainty is because of unknown size of large underground economy. Under last week's pact with creditors, the Philippines will save at least $1 billion in lower interest payments over the next 17 years. Foreign donors have chipped in with sizable aid and loans, helping reduce budget deficit and launch rural projects. Prices on coconuts, Philippines' chief export crop, are up on world commodity markets.