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Soaring food prices are likely to cost the
Philippines nearly 1 percent of its economic output this year to
ensure adequate supplies to the poor, Credit Suisse said Wednesday.
The government has announced
plans to import up to 2.7 million tons 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 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 tons
this year at up to $1,000 a ton to ensure it will have enough stocks
to sell to the poor at state-subsidized prices.
“We estimate that the fiscal
cost of importing rice at a high price and selling it at the current
domestic price could approach 1 percent of GDP [gross domestic
product] in 2008,” the Credit Suisse report said.
GDP refers to the total market
value of final goods and services produced within a country in a
year.
A potential loss of $1.3 billion
or 0.7 percent of GDP was likely because it will 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 recently raised the price it pays for rice it buys from Filipino
farmers by 44 percent to discourage rice smuggling.
Credit Suisse said the authority
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 tons this
year from 5.6 million tons in 1998, but that the growth of its
population, now estimated at more than 85 million, has outpaced
output growth.
Experts said the Philippines does
not have adequate farmland suitable for growing the water-intensive
crop.
While Philippine rice yields of
3.6 million tons per hectare (about 2.47 acres) are way above the
2.6 million tons per hectare in Thailand, the world’s top rice
exporter, Manila’s production costs per ton was substantially
higher at $96 compared to $74 for Bangkok, Credit Suisse said.
--AFP
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