Band-aid solution to inflation
To soften the adverse effects of the country’s highest inflation rate (6.4 percent) in nine years, Socioeconomic Planning Secretary Ernesto Pernia said last week President Duterte would issue several executive orders (EO) to accomplish that objective.
The EOs would, among others, order concerned government offices to speedily import rice, fish, sugar, meat and vegetables to drive down the prices of those commodities. To expedite their delivery, the Bureau of Customs would give priority to their processing and release from the ports.
In sum, the administration’s solution to the gripping financial crisis is massive importation of goods that Filipinos buy to meet their daily food requirements.
It’s assuming the availability of those items in the market would, following the law of supply and demand, force commercial traders to bring down their prices.
In the short term, these measures, when timely and properly implemented, may help lower the inflation rate.
How much the reduction will be and how long it will stay in place remain to be seen. The impact of the importations on the inflation rate will depend largely on their volume, the speed by which they are brought in, and the efficiency of delivery to their intended beneficiaries.
After the importation, what?
Tapping foreign sources to augment the supply of basic commodities has its limits and is not cheap. The country’s foreign reserves have other equally important programs and activities to fund other than the importation of food products.
Although no country can claim complete reliance on its resources to feed its people, it is essential the Philippines develop and maintain its own food sources within its territory for reasons of economic security.
With climate change wreaking havoc on agricultural production and population growth in continuous rise, the time will come when imported food will be very expensive or, worse, unavailable.
According to the National Economic and Development Authority, the EOs that will expedite the importation of basic commodities are on stream to be signed by the President within this month and will be immediately implemented.
Fine, but what about measures that will enhance the capability of our farmers to increase the yield of their crops or encourage them to sell their rice harvests to the National Food Authority (NFA) so the government can maintain sufficient buffer stocks during the lean months or unexpected natural calamities?
For the last 10 years, the NFA has been buying clean and dry palay at P17 per kilogram, which is way below the price being offered by commercial traders. The government officials who set that price seem to be unaware that prices of seeds, fertilizer and other farming components have increased 10-fold since.
The Department of Finance has opposed any upward adjustment of that price because of its possible inflationary effects. Because of that apprehension, the NFA has to import rice from Thailand and Vietnam and, in the process, improve their farmers’ economic conditions, while the Filipino farmers contend with the unrealistic P17 per kilogram offer.
While it may be patriotic to sell at the government price, the Filipino farmers cannot be faulted for selling their harvest to commercial traders because they have the right to get the best returns for the fruits of their labor.
How ironic. In the DOF’s desire to avoid the alleged adverse inflationary effects of increasing the NFA’s buying price of palay, the country is now going through its worst inflation rate in nine years. The situation may be likened to being penny wise but pound foolish.
From the political standpoint, the quick fix approach of reducing the inflation rate through the importation of food products may be effective. It will project the image of a responsive and efficient government, at least for the time being.
Whether or not that impression will hold for a long time without more meaningful and strategic actions being taken to solve the inflation problem is a big question mark.
Meanwhile, the queue for NFA rice remains long and winding.
