The main policy interest rate in the Philippines, which has been at a record low of 4 percent since July 2009, should stay low for the rest of the year to boost growth, Finance Secretary Cesar Purisima said Wednesday.

The budget deficit could be slightly higher than an upwardly revised forecast of 3.9 percent of GDP, although that remained the goal, he said, after the previous administration overshot its first-half target for the shortfall by about one third.

And the Budget Secretary of the new government, which took office on June 30, said attracting foreign investors was essential to raising the economy's long-term growth rate to 7-8 percent, improving infrastructure and cutting poverty.

''I am for keeping rates low for the rest of the year,'' Purisima, who also sits on the central bank's policy-setting board, said in an interview when asked if authorities should tighten monetary policy as the economy gains momentum.

''If you notice, our economy is still below full employment, and therefore we still have room to continue to grow the economy without creating inflationary risks,'' Purisima said.

Keeping interest rates low would help the government fund its budget deficit, as debt servicing accounts for about one-fifth of government expenditure.

In separate interviews, both officials said meeting an upwardly revised deficit target of 325 billion pesos ($7.1 billion) would be tough after the previous administration ran up a deficit of nearly 200 billion pesos in the first half of 2010.

''I am just pragmatic that anything can happen, but I am still hopeful we can hit 325,'' Purisima said.
The government has said it plans to cut the deficit to 2 percent of GDP by the end of 2013.

Manila has ''very little room for spending'' for the rest of 2010, Budget Secretary Florencio ''Butch'' Abad told Reuters.

''We are going to go through an all-out effort to improve the tax effort and really slice through the budget to see where we can make significant cuts,'' he said.

The government wants to cut costs such as huge subsidies to the loss-making state grain agency National Food Authority. The agency buys rice and other commodities and sells them usually at a loss to keep local prices low. (Reuters)