Self-inflicted inflation
COMMONSENSE - Marichu A. Villanueva (The Philippine Star) - September 3, 2018 - 12:00am

It’s the ber months already and at the rate prices of basic goods continue to rise unabated, we may not be looking forward to a merry Christmas. This is the scenario we dread, especially on the prices of chicken, pork and other meat products that are most in demand and consumed during the Christmas season.

Last Friday, the department of economic research of the Bangko Sentral ng Pilipinas (BSP) officially released its initial estimates of inflation. Citing a range of 5.5 to 6.2%, the BSP research department projected inflation will likely settle at 5.9% average for the entire month of August.

“Higher prices of rice and key food items due to weather disturbances and supply disruptions, an increase in gasoline and LPG prices, and a slight upward adjustment in electricity rates in Meralco-serviced areas contributed to upward price pressures in August,” the BSP research department disclosed in a statement.

Should inflation rate for the entire month of August indeed settle at 5.9%, it would be much faster than the previous month’s average.

The Philippine Statistics Authority (PSA) reported consumer prices in the Philippines were up by an average of 5.7% in July. According to the PSA, it was the fastest inflation rate in the country in the last five years.

 The PSA officially releases the monthly inflation indicators every first week of the month. So any day within this week, the PSA is set to release to the public the August inflation rate indicators. 

The implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law is being blamed for the surge of inflation since it took effect starting January 1 this year. Administration critics point to the resulting increase of prices in goods and services as having been caused by higher taxes passed on by manufacturers to us consumers.

The economic managers of President Rodrigo Duterte have repeatedly assuaged the public, saying the rising prices of goods and services were just “temporary” reaction of the markets to the TRAIN law. Nonetheless, the Duterte economic team recommended, among other things, the immediate implementation of the TRAIN law’s socio-economic mitigating measures to temper the surge in inflation for the rest of the year.

Section 82 of Republic Act No. 10963, or the TRAIN law, provides social mitigating measures for the poor which will run until 2020. These include the unconditional cash transfer program for the poorest 10 million households, the Pantawid Pasada Program, and the PUV modernization program. But for unexplained reasons, it took only last month for these government agencies – which are supposed to implement these mitigating measures – to roll out these additional support funds intended to its respective beneficiaries.

Then here comes the annual report of the Commission on Audit (COA) which called out the attention of the National Food Authority (NFA) for having used its P5.1-billion allotment to cover the payments of maturing loans instead of spending them for price and supply stabilization of rice and corn as provided for in its 2017 budget. The COA noted with concern this government subsidy was meant precisely for the Food Security Program of the NFA.

As part of its mandate, the NFA purchases palay from farmers for rice distribution and importation, grains business licensing and registration, and buffer stocking. However, the COA found out the NFA used P3.01 billion to offset the Bureau of Treasury’s payment of previous guarantee fees and contribution to Debt Reserve Funds, while P2.09 billion went to loan payments to the Land Bank of the Philippines and Development Bank of the Philippines.

In the same annual report, COA questioned the NFA for increased rice allocation to retailers in four areas in Luzon in 2017 and noted that this resulted in “unequitable rice distribution” in the country.

In their response to the COA findings, the NFA justified their loan payments to the two state-owned banks as their way of reducing their debt obligations rather than incur much higher interest charges on their loans.

The COA recognized the need for NFA to settle its loans first. However, COA rightly was on the point to underscore such “utilization of the subsidy other than the intended purpose could compromise the implementation of NFA’s programs for food security.”

It’s technical malversation of public funds, for Juan dela Cruz sake! Why COA stopped short in saying this in their report against the NFA begs for an answer.

 But a farmers’ group took it upon themselves to accuse NFA administrator Jason Aquino and another official for allegedly diverting the agency’s P5.1-billion fund intended to stabilize price and supply of rice and corn. In their graft complaint, they cited as a clear violation of the 2017 budget law signed by President Duterte that allocated P5.1 billion provision to this specific mandate of NFA.

All these are happening when as early as in April this year, no less than President Duterte ordered the NFA to make sure all NFA warehouses should be “filled all the way to the roof.” This was to assure consumers of enough rice stocks in the country after the intramurals between the NFA and the defunct NFA Council over rice importation that nearly brought down the country’s rice buffer stocks to a dangerous and critical low level.

 When the imported rice stocks finally arrived – though belatedly – the rice weevil infestation developed as bad weather delayed unloading them out of the ships.

And all these are coming out as we grapple with rising price of commercial rice in the markets. And worse, some areas in the country like Zamboanga, Basilan and Batanes are reportedly running short in supply of NFA rice which low-income people could afford to buy.

Obviously, these are all self-inflicted inflation causes that we Filipino consumers are being made to bear. For how long could Juan dela Cruz take it? We could only ask President Duterte what is he doing?

BANGKO SENTRAL NG PILIPINAS INFLATION
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