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Item Restricted The impact of the fiscal crisis on poverty in the Philippines(2005-04) Aquinde, Lora Mae B.; Punzalan, Renato R.The paper aims to determine whether a fiscal crisis, particularly one which is caused by external indebtedness, has significant effects on the welfare of the poor. The welfare of the poor has been measured by consumption expenditure and human development indicators such as primary enrolment and mortality rates. We use ordinary least squares estimations to determine the sensitivity of the aforementioned welfare measures to the different manifestations of a fiscal crisis. We find that a fiscal crisis worsens poverty conditions in the Philippines mainly through the crowding out of social sector spending. A fiscal crisis also affects the welfare of the poor through changes in their consumption patterns and spending power. Along with its impact through income and expenditure, external indebtedness also affects infant mortality and primary school participation although these effects appear relatively subtle. We conclude that high debt service results not only in lower real incomes but also in reductions in human capital investments of the poor. Our paper shows the heavy reliance of the poor on publicly-provided social services and, as a policy implication, that the national government budget must be allocated equitably, with a focus on those types of government spending that are pro-poor.