Scrap rice subsidies, WB tells gov’t

Non-poor households buy half of NFA rice

MANILA, Philippines—The World Bank urged the Aquino administration to finally stop subsidizing rice supposedly meant for poor households as the government continued to pile up huge losses from this program.

The foreign lender said the rice subsidies were inefficient and have not benefitted majority of the supposed recipients. Worse, the amount spent by the government on rice subsidies far exceeded the actual gains of the intended beneficiaries.

Eric Le Borgne, senior economist for the World Bank office in the Philippines, cited findings by the multilateral institution that for every P1 worth of subsidized rice enjoyed by a buyer, the government—through the National Food Authority—spent anywhere between P3 to P8.60 to deliver that assistance.

The World Bank findings, contained in its latest quarterly report on the Philippines, also said that there was a lot of leakage of the benefits of subsidized rice: About half of the rice sold by the NFA was consumed by non-poor households.

The study also noted that 20 percent of the country’s poorest households, which were supposed to be the biggest beneficiaries of the rice subsidies, accounted for only 31 percent of the rice sold by the NFA.

“We support the plan to remove the rice subsidies as these are very inefficient,” Le Borgne said.

Le Borgne served as one of the reactors to the presentations made by members of the Aquino administration’s economic team during the Mid-Year Economic Briefing last week.

In his speech, Le Borgne said that instead of subsidizing rice, the government should use the money to provide direct cash allowance to poor households.

The government has a conditional cash transfer (CCT) program, under which it grants food allowance to poor households. For recipient-households to continue enjoying the assistance, they are to send their children to public schools and have their members regularly visit public health centers.

The World Bank said the government’s idea of diverting money away from rice subsidies and to augmenting the CCT program was a prudent one and should be implemented soon.

The NFA sells its rice at P18 a kilo while commercial rice costs as high as P40 a kilo.

Year after year, the government spends billions of pesos in subsidies to the NFA so the agency can sell rice at a price lower than the cost of importing the commodity. For this year, the government is expected to spend about P4 billion in rice subsidies through the NFA.

The foreign lender said the government would increase its chances of assisting 100 percent of the country’s poor if the money currently used to subsidize rice would instead be used to expand the CCT program.

Providing direct cash allowance to poor households and requiring their children to be formally educated would be a means to address the long-standing economic problem in the Philippines—the failure of a growing economy to reduce poverty.

Government estimates said that about a third of the country’s 94 million population still live below the poverty line. –Michelle Remo, Philippine Daily Inquirer