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Malacaņang today expressed concern that the resurgent confidence of foreign investors in the Philippines generated by the government’s reform programs would lose momentum if the impasse over the value-added tax (VAT) bill drags on.

In a radio interview, Press Secretary Ignacio R. Bunye said it is unfortunate that the VAT measure failed to win Senate approval before Congress declared a three-week Lenten break starting last Friday.

"We have seen how international investors reacted positively to the reform programs (of President Gloria Macapagal-Arroyo) as shown by the soaring investment inflows, the rising rate of the peso against the US dollar and the bullish market," Bunye said.

"It’s important that, as the saying goes, we strike while the iron is hot. If we lose momentum, we might find ourselves back where we were before," he added, referring to the country’s fiscal woes.

Bunye said, however, that Malacaņang remains confident that Congress would pass the VAT bill during the three-day special session called by the President from March 30 to April 1. The regular session resumes on April 10.

"We hope that once the special session opens Congress would focus its attention on the VAT," he said.

The House of Representatives has already passed on third and final reading its version of the Malacaņang-proposed revenue measure, which seeks to increase the VAT rate by two percentage points from 10 percent to 12 percent.

Bunye, who is concurrently presidential spokesman, pointed out that at stake in the President’s tax reform package is the fate of the government’s pro-poor agenda, job-generation program and investors’ confidence in the country.

The stalemate over the VAT proposal has sparked growing anxiety over its effect on the peso. Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura has warned of a peso freefall unless the VAT bill is approved.

The feared peso freefall would be a reversal of the resurgence of the Philippine currency against the US dollar over the last few weeks.

The peso rose P53-$1 early this week, but dipped to P54.34-$1 last Thursday, while uncertainties over the outcome of the VAT, coupled with fears of a watered down VAT, depressed stock prices Friday.

The Philippine Stock Index (PSI) plunged 50 points to 2,050.28, a 2.37 percent drop.

In a related development, Finance Secretary Cesar Purisima said every day of delay in the approval of the VAT costs the country P165 million in lost revenues, or a total of P60 billion in one year.

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