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Food emergency could lead to higher inflation

A “precarious rice situation” could stoke inflation and the declaration of a food security emergency will not be enough to lower prices of the staple, a former Bangko Sentral ng Pilipinas (BSP) official said on Tuesday.

Writing for New York-based consultancy GlobalSource Partners, economist and former BSP deputy governor Diwa Guinigundo said the plan to declare a food emergency, which will allow the release of rice stocks held by the National Food Authority (NFA), was not sustainable and could even force the government to subsidize prices.

High rice prices — blamed for keeping inflation elevated last year — prompted the government to slash the tariff on imports of the grain to 15 percent from 35 percent last July. Prices remain elevated, however, and the Department of Agriculture (DA) has accused traders and retailers of engaging in profiteering.

It started selling lower-priced NFA rice in public markets and other outlets late last year in a bid to bring down prices and then pushed the declaration of a food emergency — approved by the National Price Coordinating Council last week and expected to be announced by the DA today — as a means of further putting pressure on profiteers.

Guinigundo, however, said the NFA’s stocks were too little to have a significant impact, noting that the planned release of 500,000 bags “represent only 25,000 tons or about 66 percent of the country’s rice consumption in one day.”

“Lower selling price means the government would have to subsidize in order to keep rice prices lower and closer to the campaign promise to bring it down to P28 per kilo,” he added. “But broken rice, the cheapest variety, retails at P58 per kilo based on [the] suggested retail price.”

“Such a precarious rice situation does not promise bright prospects for domestic inflation,” Guinigundo continued.

“Given the inflationary impact of an expected weakening of the peso-dollar exchange rate, the uptrend in rice prices coupled with creeping fuel price increases and the reported price hikes of 63 goods in February could generate more price pressures.”

The BSP will have to be careful about committing to more interest rate cuts, Guinigundo said, as the “supply side does not appear to be supportive of its 2-4 percent [inflation] target.”

Farmers groups have said that the declaration of a food emergency for rice was not needed as there was enough supply and harvest season was just around the corner. The government, they also said, should have gone after profiteers instead.

The Kilusang Mambubukid ng Pilipinas (KMP) on Tuesday called a food emergency declaration a “shallow attempt” to distract the public from the Marcos administration’s failure to address high rice prices.

The DA, it added, is only providing short-term solutions instead of supporting local farmers.

Former agrarian reform secretary and KMP Chairman Emeritus Rafael Mariano said the government should instead tap increased funding under the amended Agricultural Tariffication Act to purchase rice, to be sold at P25 per kilo, to stabilize prices.

“This food security emergency declaration is a smokescreen, a way to avoid taking real action. It is not about solving the rice crisis — it is about avoiding the real solutions that involve supporting local rice production, providing just farm gate prices for our farmers, and strengthening the country’s agricultural sector and rice production,” the KMP said.

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Credit belongs to : www.manilatimes.net/

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