NFA to continue incurring losses on subsidies, debt service

The National Food Authority (NFA) will continue to incur losses with its food and farm input subsidizes and its debt service payments, Agriculture Secretary Proceso Alcala said Thursday. Its outstanding losses will surge to P157 billion by the end of 2012 from P150 billion this year, the secretary told the Senate finance committee during Thursday’s budget hearing. "Yes, the agency will continue to lose money. This is because of the various programs we implement to subsidize not only food but farmers, as well," Alcala said. NFA buys both imported and local rice at a premium, and sells at a loss for P25 per kg when the real value should be P32 per kg, the Agriculture chief explained. In government’s palay procurement program, the NFA loses P7 per kg by selling the produce also at P25 per kg, he added. On the other hand, the much touted rice self-sufficiency status government is supposed to achieve by 2013 which, logic dictates, means less importation and thus less debt. “But that is not the case, said NFA administrator Lito Banayo in the same budget hearing. “We still need to pay for the interest of previous loans, on top of the programs we implement to subsidize food." Start on a clean slate The Agriculture Department is mulling on asking the national government to absorb all NFA outstanding loans so the agency can start on a clean slate. The national government may then reduce the interest payments by exercising its authority to restructure the loans, Alcala said. Of NFA’s P153-billion total outstanding loans, about P99 billion is owed to commercial banks carrying interest rates of 4.4 to 5 percent. The balance is with the state-owned Land Bank of the Philippines and Development Bank of the Philippines. Its rice importations and palay procurement program force the NFA to source funding from commercial banks, according to the NFA administrator. Its debt carries the sovereign guarantee of the Philippine government which would have to assume the obligation in case of a default in payments. NFA has a pending proposal with the Monetary Board — the central bank’s policy setting body — to restructure and convert as much as P75 billion of its debts into long-term loans since most of loans are maturing this year. Should a restructuring be approved, Banayo said government stands to gain as much as P2.5 billion interest payments. — VS, GMA News