RP grain agency's deficit soars
MANILA - The Philippines' state grain agency posted a deficit of 4 billion pesos ($90.3 million) for the first quarter, bigger than its deficit for the whole of 2007, due to heavy rice purchases at a time of soaring prices.
Officials said on Wednesday the National Food Authority (NFA), the biggest drag on public finances, could clock up a deficit of as much as 43 billion pesos this year from a shortfall of 2.6 billion pesos in 2007.
This year imports of rice, which it sells cheap locally to keep down local prices and cool inflation, will be the highest in 10 years and cost the government $1.54 billion.
The estimate of 43 billion pesos deficit this year assumes an average rice import cost of $1000 per ton, including cost and freight (C&F).
"For 2008, we expect a higher deficit, but these numbers are fluid," Finance undersecretary Jeremias Paul told reporters. "It's essentially the buy high, sell low policy of the NFA."
The NFA's deficit is also partly due to huge interest costs on its outstanding debt of 35-36 billion pesos, which it accumulated from years of financing rice subsidies, Paul said.
The grain agency is considering selling three rice variants locally, with the top variant to be sold at 32 to 33.50 pesos per kg. This scheme could lower the agency's deficit this year to 35.8 billion pesos.
"This (deficit) may go down further if there is a decision to sell it at 35 (pesos). They are computing now how much further the deficit may go down at 35, instead of 33.50," Finance Secretary Margarito Teves told reporters.
On Wednesday, the Philippines said it would buy 600,000 tons of rice from Vietnam, bringing its total purchase for this year's requirements at 2.3 million tons.
The NFA plans to borrow 8 billion pesos more this year to partly fund its rice purchases, Paul said.
Before its rice purchase on Wednesday, Agriculture Secretary Arthur Yap said the country's average procurement price was about $650-700 per ton, C&F.
At its last successful rice tender in April, Manila paid an average of about $1,136 per ton, C&F, up 60 percent from a tender in March.
Manila scrapped a tender for 675,000 tons of rice in May saying it preferred to wait for international prices of the grain to decline as more supply reaches market. It later pursued government to government rice deals with exporting countries to prevent further escalation in global prices.