THE government will have to go beyond doing the “usual stuff” if it wants to bring down rice prices and keep a lid on inflation, a former Bangko Sentral ng Pilipinas (BSP) official said.
Diwa Guinigundo, who was BSP deputy governor from 2005 to 2019, warned that the central bank had already taken notice of inflation risks and that proposals by the Department of Agriculture (DA), including the possible declaration of a “rice emergency,” were worrying.
The rice emergency plan “raises some serious questions about the ability of [the] government to ensure the sufficiency of rice supply in the market from production to harvest to marketing to retail,” he wrote in a commentary on Tuesday for New York-based macroeconomic and political research firm GlobalSource Partners Inc.
High rice prices have been blamed for a surge in inflation last year. While consumer price growth mostly stayed within target, it registered near the upper end of the 2.0- to 4.0-percent goal and even hit 4.4 percent in July.
The government slashed import tariffs on rice to 15 percent from 35 percent in July, but the DA has complained that market prices remain high and accused traders and retailers of profiteering.
Inflation fell to a year low of 1.9 percent in September, but has risen in the last two months, hitting 2.5 percent in November. The BSP last week said the rate could drop to 2.3 percent in December or go as high as 3.1 percent.
A mid-result of 2.7 percent — official data will be released next week — will drive the full-year average to 3.2 percent, Guinigundo noted, which monetary authorities forecast during their last policy meeting for 2024 on Dec. 19.
The former central banker, however, said that this year “could be problematic.”
“We have an idea that the BSP itself realizes that risks could not be dismissed,” Guinigundo said, noting that the central bank’s policymaking Monetary Board has raised its risk-adjusted inflation forecasts for 2025 to 2026.
“Higher transport fares, power rates and domestic food prices, including rice, could elevate the BSP’s baseline forecasts to 3.4 percent in 2025 and 3.7 percent in 2026,” he said.
“With these risks, the government ought to do something that works rather than the usual stuff.”
The previous risk-adjusted forecast for 2025 was 3.3 percent while that for 2026 remains unchanged.
Baseline forecasts for 2025 and 2026, meanwhile, were raised to 3.3 percent and 3.5 percent, respectively, from 3.2 percent and 3.4 percent.
The DA, Guinigundo said, should report on how rice import tariff revenues were being used to raise farm output and moderate rice prices.
He also noted that issues such as the presence of rice cartels and hoarding remained unresolved and were continuing to challenge the government’s commitment to bring down prices of the staple.
President Ferdinand Marcos Jr. pledged to lower rice prices to P20 per kilo when he was campaigning for the office. Prices, however, mostly remain above P40/kilo, and the DA has sought to combat this by selling P40/kilo rice — previously only available in government stores — in public markets.
“Imports of rice have been precisely liberalized and tarrified in the Philippines in the hope that such a policy stance would help reduce local prices of rice,” Guinigundo noted.
Local well-milled rice, however, retails between P42 and P52/kilo, while regular milled rice ranges from P39-P48, he pointed out. Imported regular milled rice is available for P44-P45 while imported well-milled rice is at P40-P56.
Guinigundo also questioned plans to have the National Food Authority (NFA) release its stocks or allow state-owned firms such as Food Terminal Inc. to compete directly with rice importers by bringing in shipments from abroad.
“But this, even in the past, failed to temper rice prices and inflation,” he said, adding that “buffer stocks at NFA would just be drowned in the market.”
The matter of how the agency can price its rice without losing money should also be clarified, Guinigundo continued.
As for government firms being allowed to import rice, he said this would be “like bringing back NFA to do the importation again, believing that rice prices could be made to level off.”
“The only difference is that tariff rates have been reduced from 35 percent to 15 percent but the reduction in retail prices could only be described as minimal.”
