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Peso dips after Camacho goes

Camacho's resignation will take effect on Sunday, November 30.
Camacho's resignation will take effect on Sunday, November 30.

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MANILA, Philippines (Reuters) -- Markets in the Philippines Monday are weighing the resignation of the country's respected finance minister Jose Camacho.

There is concern the government could lose a grip on its huge debt burden during a volatile six months before elections.

Camacho, whose skill in negotiating international bond deals and partial success in capping a yawning budget deficit had won him market plaudits, said on Friday he would quit at the end of this month because he was exhausted with the job.

Traders dumped the peso on Monday, sending it to its lowest level against the dollar since the political turmoil surrounding the ouster of President Joseph Estrada in January 2001.

The peso, already the weakest Asian currency this year thanks to constant political bickering and a failed coup attempt in July, briefly traded at 55.70, just a touch stronger than its record low of 55.75. It strengthened to 55.63 in the afternoon.

Central Bank Governor Rafael Buenaventura said the fall was temporary and that authorities were not intervening in the market to halt the peso's fall for now.

"Our economic fundamentals remain sound. People just have to be convinced that the economic reforms remain and the budget deficit reduction efforts will be sustained," he said.

Rates on Philippine three-month Treasury bills jumped nearly 30 basis points at a regular auction on Monday in a sign the government would have to pay more for its borrowings in the wake of Camacho's departure. The Treasury rejected all bids for bills with maturities of a year as it judged the rates too high.

Analysts said it was crucial for President Gloria Macapagal Arroyo to quickly choose a successor who could match Camacho's skills and experience, but there were concerns that politics could get in the way.

Aside from Camacho, Treasurer Sergio Edeza said on Friday that he would leave his post by the end of the year, raising worries that the government's economic team was disintegrating as politicians start to manoeuvre ahead of the May elections.

Finance Undersecretary Juanita Amatong will temporarily fill Camacho's boots, but has expressed reluctance to succeed him.

"Obviously the resignation casts a shadow of uncertainty over the market, over the badly needed budget reforms, the BIR (Bureau of Internal Revenue) reforms," said Andrew Long, research head at ATR Kim Eng Securities in Manila.

The government, which has run budget deficits for nine of the past 13 years and has an overall debt mountain of $57.8 billion, spends about 29 percent of its total resources on servicing its creditors. That share is set to rise to 32 percent in 2004.

Camacho had presided over a stabilization of the deficit in recent months after the government blasted through three deficit targets in 2002.

But weak revenue collection and the prospect of pump-priming ahead of the elections mean the improvement remains precarious for Asia's largest sovereign debt issuer outside Japan.

On the stock market, the PSE composite was flat Monday, closing just 0.02 percent higher at 1334.58.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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