NFA subsidy to double in 2010

MANILA, Philippines - The National Government will allocate P8 billion next year to subsidize the money-losing operations of the National Food Authority (NFA), a move seen to put additional pressure on the country’s fragile fiscal position.

Next year’s subsidy for NFA is twice the P4 billion programmed for this year and four times the P2 billion given to the agency in 2008.

NFA’s top finance officer said the grains agency needs the subsidies to be able to continue importing rice for the country.

“The National Government acknowledges that our operations are highly subsidized,” said Celia Tan, NFA assistant administrator for finance and administration.

The increase in the subsidies for the state-owned grains agency runs contrary to the plans of the Department of Finance (DOF) to cut the subsidies given to government-owned and controlled corporations (GOCCs).

NFA is tasked to ensure the country’s food security and to keep the supply and prices of rice stable. The agency usually imports rice to cover the shortfall in production but sells this at cheaper prices to ensure market stability, resulting in heavy losses for the government.      

The grains firm expects to incur losses of P30 billion from its operations this year, same as in 2008.

To date, NFA has total oustanding debt of P115 billion comprising mostly of short-term liabilities. 

On Tuesday, the agency successfully raised P9 billion from the sale of 10-year Treasury bonds. The proceeds will be used to refinance its maturing debt.

Subsidies disbursed by the National Government to GOCCs such as NFA have reached P12.56 billion from January to September, P1.81 billion more than the P10.75 billion disbursed in the same period last year, latest data from the DOF showed.

This was despite the government’s ballooning budget deficit which has already swelled to P237.5 billion during the nine-month period, just P12.5 billion short of the full-year ceiling of P250 billion.

With subsidies already at P12.56 billion as of end-September, disbursements for the whole of 2009 would likely exceed total subsidies released last year amounting to P13 billion.