The Finance department has asked the National Food Authority to immediately explain why it bought palay or unhusked rice way below its projected buffer requirement in the second half of 2017 and revised its buying mix to heavily favor imports over rice from local farmers, despite ample funds at its disposal and standby credit.
For its debt-servicing requirements in 2017, the NFA had a P5.4-billion advance from the national government that was favorably endorsed by the DoF to the BTr.
This amount was for the NFA’s obligations that matured in October and November of that year, so that its available government-guaranteed credit facilities could be used to augment funds for rice procurement.
“Our analysis further shows that the NFA had ample resources coming from cash balances and available credit facilities, even without considering the subsidy receipts and uses, to procure the projected volume of local rice at least up to the third quarter under its May projection submitted to the DoF,” said assistant secretary Soledad Emilia Cruz of the DoF’s Corporate Affairs Group, in her Sept. 5 letter to Aquino.
The DoF-CAG is in charge of implementing policies affecting government-owned and controlled corporations like the NFA, and in monitoring the cash flows of the government corporate sector.
Despite the availability of funds, in the second quarter of 2017 (April-June), when the NFA reported that its buffer stock was approaching critical levels, the actual palay procurement was only 6,331 MT versus the estimate of 22,552 MT submitted by the NFA to the DoF in May 2017.
Cruz pointed out ithat the actual palay procurement for the second semester of 2017 was only 13,714 metric tons, which was much lower than the 151,129 MT projection that the NFA submitted to the DoF for the same period.
“In terms of mix of rice procurement, underlying assumptions in the revised May 2017 projection showed a mix of 68:32 in favor of imported rice. However, actual stock flow for 2017 resulted in a mix of 94:6, in favor of imported rice, which was a substantial drop in the share of actual local rice procurement compared with the May 2017 projections,,” Cruz added.
Cruz bared that on top of its funds and NG-guaranteed credit facilities that the NFA can use if funds are insufficient to procure rice, the DoF can also provide national government advances for debt servicing or guarantees on the required additional credit to support the agency’s operations. Thus, the NFA was assured of enough funds to buy the projected volume of local rice at least up to the third quarter under its May projection.
The NFA is required to keep a buffer stock good for 15 days at any given time and a 30-day buffer stock during the traditional lean months of July to September.
Given its findings on the NFA’s cash flow and actual procurement done last year, the DOF told the agency to explain the drop in actual palay procurement as against projection for the second quarter of 2017; the decline in procurement turnout for the rest of the year; the drop in the share of local rice procurement; and its failure to roll over its NG-guaranteed facilities so that it could have funds available to augment its rice procurement capabilities.
“We would highly appreciate receiving your immediate responses to our queries,” Cruz said in her letter to Aquino.
The Department of Budget and Management and the rest of the Cabinet’s economic cluster on Thursday urged the Senate to pass the rice tarrification bill this month to respond to the increasing prices for rice.
A similar bill that removes quantitative restrictions on rice imports has already been passed in the House.
“A shift from quantitative restrictions on rice in favor of tariffication will reduce its retail price by four to seven pesos,” Budget Secretary Benjamin Diokno said.
In a press conference last Wednesday, the government announced that it will immediately release 4.6 million sacks of rice in NFA warehouses to markets all over the country while also allocating 2.7 million sacks to Zamboanga, Basilan, Sulu, and Tawi-Tawi. Some two million sacks of rice previously contracted to be delivered is also expected to arrive before the end of September.
In addition, the NFA Council authorized the importation of five million sacks of rice that will be arriving over the next six weeks. Another five million sacks will be imported early next year.
Earlier this week, the Philippine Statistics Authority said the rate of inflation hit 6.4 percent in August, a nine-year-high, and traced the increase to rising prices for rice, fish, vegetables and meat.
A spokesman for the NFA on Thursday said imported rice would not immediately bring prices down.
In an interview with radio dzMM, NFA spokesman Rex Estoperez said the imports would beef up the cheaper NFA rice distributed to the market, but this would not address high prices.
He also said the country’s economic managers had different opinions on rice imports.
“Some say if the country imports more rice, prices will go down. But if we say we want to buy at a higher price from local farmers, they’ll say it is inflationary,” he said in Filipino.
The NFA on Thursday assured the public that the agency will continue to distribute its P27 and P32/kilogram rice in the markets to ensure that consumers will have alternative sources of low-priced rice.
Currently, NFA distributes rice through its 15,892 accredited retailers and outlets, both inside and outside markets.
From January to Aug. 23, the NFA said it had already distributed a total of 4,443,082 bags of rice through its accredited retailers, outlets and other recipients.
In a meeting held Sept. 4, the NFA Council approved an additional importation of 250,000 metric tons of rice to beef up the current NFA stocks and enable the agency to effectively respond to the growing clamor for cheaper rice.
The additional importation can increase NFA’s active participation in the market by as much as 20 percent.
Earlier, in a special meeting held Aug. 29, the NFA Council also approved the immediate importation of 133,500 MT of rice by the private sector for distribution to Zamboanga, Basilan, Sulu and Tawi-Tawi to mitigate the high prices of commercial rice in those areas. With Maricel V. Cruz