DoF expects rice prices to fall below P50 per kilo by August

THE LOWER tariff on rice imports is expected to bring rice prices to below P50 per kilogram by August, the Department of Finance (DoF) said.

“By slashing the tariff on imported rice from 35% to 15%, we anticipate an average of 10% reduction in retail prices for the rest of the year,” Finance Secretary Ralph G. Recto said at the Economic Journalists Association of the Philippines-San Miguel Corp. economic forum on Monday.

“This could lower the price of rice by at least P5 per kilo. From an average of P54.40 per kilo last June, prices could go down to below 50 pesos as early as August.”

President Ferdinand R. Marcos, Jr. implemented the tariff reduction via Executive Order (EO) No. 62 last month.

The Department of Agriculture’s price monitors reported that well-milled rice was selling in Metro Manila markets for as much as P55 per kilo.

Mr. Recto said that lower tariffs on rice could reduce full-year inflation by 0.18 percentage points.

Headline inflation eased to 3.7% in June from 3.9% in May. Rice inflation, which accounts for almost half of overall inflation, eased to 22.5% from 23% a month earlier.

Rice prices were likely to have remained above P50 had the government not cut tariffs, Mr. Recto said.

“A sustained high price of rice could continue to drive inflation, delaying the reduction of policy interest rates by the (central bank) and derailing the country’s economic growth trajectory,” he added.

Mr. Recto said that the tariff cut will result in foregone revenue of P9.2 billion this year but noted that “in the bigger picture, this improves the welfare of households, especially the poor.”

He also cited the 27.7% increase to P221.7-billion budget for agriculture sector, much of it going to modernizing farming. Around half of the agriculture budget goes to rice, he added.

“This will enable us to install more irrigation systems, construct farm-to-market roads, procure agri machinery and equipment, and prioritize research and development,” Mr. Recto said.

The DoF said it is working with Congress to ensure an increase in the P10-billion-a-year allocation for the Rice Competitiveness Enhancement Fund (RCEF), which is funded from import tariffs.

Republic Act No. 11203 or the Rice Tariffication Law, the law which creates RCEF, authorizes the fund to distribute machinery, seed, credit, and fertilizer for six years. The RCEF expired last month, but efforts are underway in Congress to extend its term and increase the annual allocation.

Farmer’s groups last week asked the Supreme Court to issue a temporary restraining order freezing EO 62, saying they were not consulted properly prior to its issuance, as the law requires.

“I don’t think there’s a reason for the courts to get involved in that,” Mr. Recto told reporters on the sidelines of the forum. — Beatriz Marie D. Cruz