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For importing more rice, NFA deficit soars

abs-cbnNEWS.com | 11/18/2008 8:22 PM

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For importing more rice at higher prices, cash-strapped National Food Authority is expected to book a deficit of P72 billion this year, almost double than the expected level.

Finance officer-in-charge Jeremias Paul Jr. said Tuesday that the new deficit assumption is higher than the original projection of P43.1 billion this year.
 
The new target was based on a volume of between 2.1 million metric tons and 2.4 million metric priced between $795 per metric ton to $900 per metric ton.
 
“The main driver is the price and volume effect,” Paul stressed.
 
For next year, Paul said NFA intends to import 1.5 million metric tons of rice as local procurement was increased to one million metric tons from 400,000 metric tons. 

Supply shortage forced the Philippines, the world's largest rice importer, to secure more rice deals from major rice exporters, such as Thailand and Vietnam. At the time, high fuel prices forced production inputs to food crops to soar.

Rice is a staple in the Philippines, and politicians avoid perceived or real supply shortages as these have caused the toppling of politicians in the past.

While both supply and the price of rice have since stabilized, the cost to the NFA's budget, and, in a wider scale, to the government, proves to be a major burden.

NFA's importations resulted in a need for higher taxes to cover the import duties slapped by the Bureau of Customs. NFA expects tax subsidies to the tune of P39 billion this year--more than five times the programmed subsidy of only P7.5 billion and almost three times the subsidy amounting to P13.9 billion extended to NFA last year.
 
The inter-agency Fiscal Incentives Review Board has approved in principle the increase NFA's tax subsidies amounting to P32 billion this year.
 
The NFA taps from foreign and domestic creditors for loans, which are then guaranteed by the Philippine government.

NFA sells rice sourced both locally and from abroad at subsidized prices of P18.75 to P33.5 per kilo.