AFP April 9, 2008
Manila - Soaring food prices are likely to cost the Philippines nearly one percent of its economic output this year to ensure adequate supplies to the poor, Credit Suisse said on Wednesday.
The government has announced plans to import up to 2.7 million tonnes this year even as prices soared to near-historical levels amid tight global supplies.
President Gloria Arroyo has cited rising food prices as a threat to the Philippine economy, while analysts have warned major rice importers that soaring prices could lead to social unrest and pose security problems. The government has deployed police and military to crack down on rice hoarders.
The Swiss-based investment bank said in a study that Manila was likely to import 2.6 million tonnes this year at up to 1,000 dollars a tonne to ensure it would have enough stocks to sell to the poor at state-subsidised prices.
"We estimate that the fiscal cost of importing rice at a high price and selling it at the current domestic price could approach one percent of GDP (gross domestic product) in 2008," the Credit Suisse report said.
A potential loss of 1.3 billion dollars or 0.7 percent of GDP was likely because it would incur margin costs for storage and distribution and release it into the domestic market at its current selling price, it added.
The government, through the National Food Authority (NFA) is the Philippines' main rice importer as well as the buyer of last resort for locally grown rice. It has recently raised the price it pays for rice it buys from Filipino farmers by 44 percent to discourage rice smuggling.
Credit Suisse said the NFA was likely to finance the bulk of its loss through government-guaranteed borrowings from commercial and state banks.
"Although the cost of the rice subsidy is sizeable, we think the government has enough fiscal flexibility to shoulder this burden without impairing its sovereign creditworthiness," it added.
Credit Suisse said Philippine rice production has been rising steadily, to 11.3 million tonnes this year from 5.6 million tonnes in 1998, but that the growth of its population, now estimated at more than 90 million, has outpaced output growth.
Experts say the Philippines does not have adequate farmland suitable for growing the water-intensive crop.
While Philippine rice yields of 3.6 million tonnes per hectare (2.47 acres) are way above the 2.6 million tonnes per hectare in Thailand, the world's top rice exporter, Manila's production costs per tonne was substantially higher at 96 dollars compared to 74 dollars for Bangkok, Credit Suisse said.
Copyright © 2008 AFP
http://afp.google.com/article/ALeqM5h9WGcFopw-2fqchWL_W5R321cFuw
This email was cleaned by emailStripper, available for free from http://www.papercut.biz/emailStripper.htm