This report follows up on a Social Impact Assessment of the Crisis which the Bank carried out in the Philippines in February 1998. One of the main recommendations emerging from that assessment was for the Government to protect health, education, and other social sectors from budget cuts relative to other sectors. Across these sectors, to identify and protect the most effective programs and those that the poor use disproportionately. Within any sector, to protect key inputs such as textbooks, some important drugs that are used more by the poor than by others (in particular restore funding for immunization programs to 100 percent), rural infrastructure, irrigation, and livelihood and employment generation programs. Following this initial assessment, the purpose of the present report is to take this analysis one step further, assess in more detail how social expenditure priorities are being met in the present context of fiscal austerity, and develop recommendations in this respect. At the overall level, the best course of action for the rest of the year would appear to be not to seek further lifting of reserves beyond those already approved on July 10, 1998 which already cover most essential social expenditures, but rather to actually implement the said decision, by notifying agencies of corresponding allotment releases. Most importantly, to release the notice of cash allocation necessary to settle all due payments on 1997 and 1998 expenditure obligations.
