MANILA - Every additional peso the government spends should go to improving the country’s growth prospects, the Bangko Sentral ng Pilipinas (BSP) said.

The Philippines’ credit standing, it added, will not suffer as long as the government’s stimulus efforts are successful in averting a recession.

"As I have said in the past, spending must be targetted and tractable," central bank Governor Amando M. Tetangco, Jr. said in an e-mail.

"In other words, in addition to the quality of the projects to be undertaken in the stimulus package, it is important to ascertain the long-term sustainability of the government’s fiscal position."

The government last week raised this year’s deficit cap to P250 billion, from P199.2 billion, and said it would be increasing its borrowings to support a much lower growth goal — from 3.1-4.1 percent — of 0.8-1.8 percent.

The new targets followed first-quarter growth of just 0.4 percent — which had also prompted the central bank to criticized the government for not spending enough to pump-prime the economy.

"The National Government’s ability to spend is determined largely by its ability to raise revenues and borrow," Mr. Tetangco said.

"The ultimate borrowing mix will certainly have an impact on interest and exchange rates, and as such would have to be managed, taking into account its implications on domestic borrowing costs.

"This is why the quality of the projects to be funded is very critical in ensuring any stimulus results in raising growth prospects," he said.

The BSP, in criticizing the government for not doing enough to address the impact of the global recession, also said that about 26% of first-quarter spending simply went to debt payments.

The International Monetary Fund has expressed concern over the government’s fiscal position, saying that weakening government revenues would ultimately erode the country’s ability to spend its way out of the crisis.

International debt watchers Standard & Poor’s and Fitch Ratings have likewise warned of a possible ratings downgrade if the government fails to raise its revenues through a wider tax base, or if the only way to meet budget goals is through spending cuts.

In the wake of last week’s announcement of new macroeconomic targets, BSP Deputy Governor Diwa C. Guinigundo, in a separate e-mail, said "That is the thrust of [Finance] Secretary [Margarito B.] Teves’ saying that even as revenues are weak, we will keep the same level of expenditures."

"What we in the BSP have been saying is just to make sure government is spending as programmed and to make sure the disbursements are actually spent by local government units and line agencies," Mr. Guinigundo said. -- P. L. G. Montecillo