THE SURGE in the prices of imported rice will reflect on the outstanding debt of the National Food Authority (NFA), currently estimated to reach P108 billion by year's end--more than double the P43 billion recorded in 2007.

The Department of Finance, which monitors government-owned companies, said the external factor that led to historic high prices of rice earlier this year, apart from rising demand for the staple, was to blame for the worsening financial health of the NFA.

Jeremias Paul Jr. told reporters Friday that latest estimates by the DOF showed that the NFA's debts could balloon to over P100 billion by end-2008, following moves to tap loans needed to help fund its rice importation.

The NFA originally expected the price of imported rice to average at $795 per metric ton this year, but it actually soared to over $1,000 per metric ton in the previous months. The price of imported rice has eased since November to within the territory of $900 per metric ton--still beyond initial projections.

According to DOF estimates, the NFA's budget deficit for this year could have settled at P43 billion had the price of imported rice stayed at $795 per metric ton. But because of the sharp rise in prices of imported rice, the NFA's deficit this year could double.

Because of higher deficit in its operational budget, the NFA was forced to borrow more, thus resulting in a bloated debt stock.

The NFA was programmed to import 2.1 to 2.4 million metric tons of rice this year to help meet the total domestic requirement for rice. Imported rice accounts for about 10 percent of total rice consumption in the Philippines.

Officials reacted to critics' claim of the NFA's financial bleeding, saying that the losses of the agency were a natural consequence of its mandate and had nothing to do with management style.

The NFA is tasked to ensure availability of affordable rice in the domestic market no matter what the external situation may be, NFA officials explained earlier. Amid rising prices of rice in the world market, selling rice at affordable prices in the domestic market would naturally result in losses.

Estimates on the NFA's losses had not taken into account expenses for taxes and duties on imported rice. To prevent the NFA's losses from burgeoning, the government began shouldering the NFA's import taxes and duties.

Projections made earlier said the tax subsidy to be received by the NFA for the entire year would amount to P39 billion, much higher than the P13.9 billion recorded last year.

For 2009, the government has programmed the NFA's tax subsidy at P34 billion.

Apart from tax subsidies, the NFA also receives cash assistance for operations. The government granted P2 billion in cash to the NFA this year, and intends to give P4 billion next year.