Removing rice subsidies may impact on inflation

Looking only at a possibility, the Bangko Sentral ng Pilipinas (BSP) said Sunday that should government decide on dropping rice subsidies, there'd be no more escaping from the "immediate escalation of rice prices. "There will be a one-off effect on the year-on-year inflation rate for about a year. Recall that rice is more than 9 percent of the consumer price index," BSP Deputy Gov. Diwa Guinigundo said. There should be a heightened government capacity to "pursue its rice-sufficiency programs and the elimination of middle men helping make the price of rice unnecessarily more expensive," Guinigundo added. "Government needs to regularly clean up the list of beneficiaries," he said. As the subsidy stops, public resource will then be channeled to basic agriculture infrastructures, like comprehensive irrigation programs, drying and storage facilities, and economies of scale farming, among others, he explained. "The middle men are expected to increasingly disappear because distortions in marketing and pricing will also be addressed in the process," the Bangko Sentral deputy chief said. Meanwhile, Guinigundo pointed at the "policy choices" on why debts of the National Food Authority (NFA) ballooned. He said the 2004-2005 fiscal crisis government experienced and the recent global financial meltdown forced government to import rice and other poverty alleviation activities that took the toll on public finance. In just five years, the NFA's debts ballooned some P40 billion to P171.5 billion. "What happened in the last five years were driven by the policy choice to continue the subsidy option in the light of the fiscal crisis from 2004 to 2005 and the global financial crisis in 2007 and 2009," Guinigundo said. He said the periods coincided with the years that Finance Secretary Cesar Purisima has called into question why the NFA incurred such a hefty debt. Purisima has asked the Commission on Audit to review the agency's fiscal operations, recommend the prosecution of people if warranted, and endorse the cessation of its rice subsidy activities to Malacañang to put an end to corrupt practices and streamline government's limited financial resources. —JE/VS, GMANews.TV