Rice tariffication law to slash inflation by 0.6%

The law signed by President Duterte which lifed the import restrictions on rice, making the food staple more affordable for Filipinos, would lead to lower inflation, according to the Bangko Sentral ng Pilipinas.

BSP Deputy Governor Diwa Guinigundo said the signing into law of the rice tariffication bill, converting quota restrictions on rice into tariffs, may result in at least 0.6-percentage point reduction in inflation this year and another 0.3 to 0.4-percentage point next year.

Guinigundo said the government is about to complete the implementing rules and regulations of the new law amending Republic Act 8178 or the Agricultural Tariffication Act of 1996 to ensure quick implementation.

“It’s split because the implementation is already close to the end of the first quarter,” he said. Rice accounts for nine percent of the consumer price index (CPI) basket.

Based on its latest assessment, the central bank’s Monetary Board sees inflation easing back to within its two to four percent target at 3.1 percent this year and three percent next year.

Inflation kicked up to 5.2 percent last year from 2.9 percent in 2017 due to higher oil and food prices, particularly rice, as well as weaker peso. It breached the BSP target as early as March with 4.3 percent and peaked at 6.7 percent in September and October.

This prompted monetary authorities to jack up interest rates by 175 basis points in five straight rate-setting meetings from May to November last year to prevent inflation from spiraling out of control.

Easing inflation to six percent in November, 5.1 percent in December, and a 10-month low of 4.4 percent in January allowed the BSP to take a breather from its tightening episode and keep interest rates steady last Dec. 13 and Feb. 7.

The new law also calls for the creation of the Rice Competitiveness Enhancement Fund (RCEF) as a special rice safeguard duty to protect the rice industry from sudden or extreme price fluctuations.

The P10-billion fund will help farmers improve their profitability and competitiveness.

“With the tariff collection, a fund would be established to help the farmers achieve greater efficiency and productivity in agriculture. They are, therefore, expected to be more competitive. This is a landmark legislation that would help greatly in rationalizing rice farming in the Philippines,” Guinigundo said.

Instead of limiting how much rice will enter the country through quota restrictions, rice imports from Southeast Asian countries would be slapped 35 percent pursuant to the ASEAN Trade in Goods Agreement, while imports from nonASEAN member states would be levied 50 percent in accordance with the World Trade Organization (WTO) agreement on agriculture.

“After all, the farmers are also consumers and together with the other 100 million Filipinos, will benefit from lower rice prices,” he added.