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Marcos announces devaluation of the peso

By FERNANDO DEL MUNDO

MANILA, Philippines -- President Ferdinand Marcos Saturday announced the devaluation of the peso and removal of currency controls in austerity measures designed to secure foreign loans and ease the nation's worst economic crisis since World War II.

Critics immediately charged the action meant surrender to harsh conditions set by the International Monetary Fund that would drive up inflation and cause 'hardship for Filipinos.'

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In a nationally televised address, Marcos said the austerity measures were part of an economic recovery program that had been 'accepted' by the IMF after two weeks of negotiations.

The measures, spelled out in a letter of intent, 'entail sacrifices from everyone,' he said. But he promised 'the time will soon come when we will have both full economic recovery and growth.'

The Philippine economy, burdened by heavy foreign debt, is suffering from a flight of capital that accelerated following the assassination last year of popular opposition leader Benigno Aquino.

The murder, which critics have charged was carried out by the military, set off the worst anti-government protests since Marcos rose to power in 1965.

The 67-year-old president said the IMF approval precedes the grant of a $650 million IMF standby credit expected shortly.

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The credit would lead to a rescheduling of $25.6 billion in debt to 480 foreign banks, new loans of $1.65 billion and trade financing of from $3 billion to $4 billion, he said.

The United States, Japan and South Korea have granted the Philippines a 'bridging loan' for the country's short-term financing needs, Marcos said.

He announced the immediate lifting of all controls on foreign exchange transactions and imports to allow factories strapped for raw materials to resume full operations.

He said this meant the scrapping of a 'multiple exchange rate system,' allowing the peso to seek its own rate.

In the past two weeks, the peso tentatively has been allowed to 'float.' The currency's rate has risen by 2.5 percent from 18 pesos to 18.45 pesos to a U.S. dollar.

Marcos said he did not expect a drastic change in the peso rate. The peso has fallen 63.3 percent since three devaluations that began in June 1983, when the rate was 11 pesos to a dollar.

Marcos said the government would broaden the tax base, remove tax exemptions for certain companies and promote efficient tax collection by punishing 'scoundrels' in the revenue service and tax evaders.

Businessman and civic leader Jose Concepcion said the measures meant 'a surrender' to IMF conditions that led to high inflation in such countries as Mexico and Argentina.

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'It means a prescription for hardship for the Filipinos,' said Concepcion.

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