Cruz hints at revenue woes

OUTGOING TREASURER DENIES POLICY ROW  WAS BEHIND RESIGNATION

By Jun Vallecera and Mia Gonzalez

Reporters

OUTGOING Treasury chief Omar Cruz hinted on Wednesday of pressure on revenue flows this year and next due to the absence of new tax measures. But he told reporters this year's outlook should not be as bad as in 2008 when intelligent planning and the cultivation of support of members of the legislature should help ease the pressure. According to Cruz, this year's anticipated P63-billion budget shortfall can be bridged by privatization proceeds of some P25 billion. "From the sale of government shares at the Philippine Telecommunications Investment Corp. alone this has already been met," Cruz noted. The Privatization Management Office had sold the PTIC shares for P25.2 billion two months earlier with expectations of more asset sales proceeds down the line. "But what is important is that there are options available because without them, P63 billion is a tough act," Cruz said. He stressed it was important for the government to come up with "a new tax program" in support of the goal to balance the budget by 2008.  "From the strategic point of view, we need to come up with a new tax program, otherwise it will be difficult to balance it by 2008. It is very clear what we need to do," Cruz said. The government already spent far more in the first three months this year than it originally intended, having spent P6.1 billion more than planned. Instead of capping the deficit at P45.8 billion, the actual level stood at P52 billion, mostly because revenue flows were significantly hampered. Total revenues during the period were P18.5 billion below the program of P255.8 billion as actual revenues stood at only P237.3 billion. On Wednesday, Finance Secretary Margarito Teves shortlisted three personalities from the private and public sector as likely replacements to Treasurer Cruz whose resignation on Tuesday has been accepted by President Arroyo. At the same time, Cruz played down speculations that his departure was triggered by a policy dispute, saying he really did it for personal reasons. Sources insisted there was a policy row, but others said it was simply the low pay. Malacaٌang Palace, meanwhile, assured the public Cruz's exit will not hurt the fiscal program. On Cruz's successors, banking sources said Alfonso B. Cruz, LandBank executive vice president for institutional banking, was handpicked by Teves as the younger Cruz's successor when he leaves office on June 1. The elder Cruz had been Teves's second in command when he led LandBank prior to assuming the Finance portfolio. The LandBank executive, like the outgoing Treasury chief, is also a former Citibanker. Sources said the head of treasury at HSBC, as the British-owned Hong Kong and Shanghai Banking Corp. is known at present, is a top contender for the post. Analysts said HSBC treasury chief Arnulfo "Wick" Veloso has been short-listed for the job. One other private sector practitioner with a banking background was on the Teves list but sources were unable to discover his identity. The outgoing Treasurer played down reports he was leaving on account of a policy debate with monetary officials over interest rates that he brought down in just two years from more than 7 percent to below 3 percent. Cruz's success has hurt the banks' profit margins at a time when they are most disinterested in lending and just at the point when the Bangko Sentral ng Pilipinas is trying to put a damper on money supply growth of over 20 percent. The 22.8-percent liquidity growth in January has alarmed the forward-looking BSP that is used to seeing M3 growth, its other name, at about 13 percent. "There can never be any policy debate because that's like saying the monetary sector does not operate independent of the fiscal. "The monetary authorities are entitled to their own views and whatever that is, I simply spot my own opportunities and issue securities where the markets are," Cruz insisted. He said he never intended to complete the six-year stint of the office and wanted to quit as soon as he has delivered the goals he set out doing from the beginning. "I have accomplished my deliverables and as Treasurer of the Republic at this point I have nothing more to do," Cruz said. He completed in January the last of the government's commercial borrowing of $1 billion to bridge the budget shortfall this year; and the government has practically sealed agreements with official development assistance, or ODA, sources to complete it. He also said he has institutionalized the process of making swap agreements, issuing bonds and similar exercises so that the next Treasurer "need not be paid as highly as I was." "Not that I was paid very high to begin with," Cruz said in a light moment. Banking sources claimed Cruz left on account of the measly pay he gets—only P29,000 a month, and not for much else. He has four children, three of whom are still in college. He said he has always received job offers all his professional life and plans to go back to the market as soon as the one-year moratorium for all former public officials expires. "Once a market man always a market man," he quipped. That he announced his resignation at a time of a perceived quarrel with the BSP was "only incidental," Cruz insisted. He plans to visit his ailing 84-year- old mother in the United States as soon as he is free. Meanwhile, President Arroyo on Wednesday assured all stakeholders in the Philippine economy that the government will sustain its policies aimed at "fiscal prudence and sound management" following the resignation of Cruz. Palace officials also said the President will pick a suitable replacement for Cruz whose resignation takes effect on June 1.  "There will be no change in policy and the country is committed to fiscal prudence and sound management. We remain committed to proactive debt management and continued development  of the domestic debt and capital markets," Mrs. Arroyo said in a statement. The President was apparently addressing investor concerns over the resignation of Cruz, who had helped transform the Philippines into a leading performer among emerging markets. Executive Secretary Eduardo Ermita said at his weekly news conference that Malacaٌang will ask the economic managers  to draft an "official position" to assuage the concerns of the business community about the resignation of Cruz. Ermita said President Arroyo has yet to bare her short  list of candidates, but said the country is rich with competent individuals who can take over the job. On the negative market reaction to Cruz's resignation, Ermita said: "I wish those involved in this activity would not take it in a negative light. In the first place, there are many competent people in the Philippines who can take over the job of national Treasurer . . . I am very sure there's no reason why we cannot get a good replacement for Mr. Omar Cruz." He said Cruz is leaving at a time when the country has strong economic fundamentals which the economic team, guided by President Arroyo, would sustain and build on—a message the economic managers would officially convey to various stakeholders upon instructions of Palace officials. He added that Cruz is not leaving the government immediately because his resignation takes effect on June 1, giving the Bureau of Treasury enough time to prepare for his successor. He said a national Treasurer only manages the national coffers but "the policy direction comes from the higher-ups, especially from the Office of the President and other Cabinet members in charge of projects." "They manage the national coffers but the disbursement depends on the direction given by the President  as the head of government," Ermita said. Ermita declined to comment on reports that Cruz was prompted to resign because of policy differences with monetary officials, saying this would be best answered by Finance Secretary Teves and Bangko Sentral Governor Amando Tetangco Jr.

 

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