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Business

REIN in inflation!

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

It didn’t take long for Finance Secretary Ralph Recto to take full command of the economic cluster as he assumed responsibility for keeping inflation numbers low. And Ralph even coined an acronym: REIN or Reduce Emerging Inflation Now. As a politician rather than an academician, Ralph knows what to emphasize and communicate. He zeroed in on what hurts the people in their pockets.

Having Ralph at the Department of Finance (DOF) is such a relief. He’s a sharp contrast to Ben Diokno who washed his hands when inflation numbers were rising fast. At the time, Ben could only urge other government officials to do something to keep prices, especially of food, down. Ralph is saying, that’s my problem. He is lucky that inflation in January is significantly slower than the 8.7 percent recorded in the same month last year and the 3.9 percent in December. It is also well within the government’s overall target band of two percent to four percent.

Well, Ralph has the gravitas to take decisive control of the economic cluster. In so doing, he sidelined newly appointed Presidential Adviser for Economic Affairs Deck Go who was supposed to be the new head of the economic cluster. Having been NEDA Director General, Ralph is confident he knows enough economics to deal with economic issues. His political background keeps him grounded unlike technocrats with PhDs. It is his job to keep the prices of goods and services stable.

Remember how BBM floundered when confronted with high inflation numbers early last year? Diokno didn’t even brief him enough to prevent him from sounding uninformed by claiming our inflation was not really high. Diokno as economic cluster head should have also advised BBM regarding those controversial sugar import decisions and the imposition of the retail price cap on rice. The gobbledygook coming from DOF at the time made the BBM administration seem detached from real problems of real people.

Said Recto: “As I’ve said before, our top priority is to reduce inflation and protect the purchasing power of the Filipino people. Addressing inflation will not only further grow the economy but it will help boost our revenue collection and improve the quality of life of Filipinos.” Exactly, Sec. Ralph!

Sec. Ralph has good numbers to start with. Food inflation eased to 3.3 percent from a high of 11.2 percent in the same period a year ago and the 5.5 percent rate in December 2023. Compared to the previous month, the drop in food inflation was due mainly to the lower prices of vegetables and meat.

But rice is still a problem. Rice inflation increased compared to last month.  Again, Recto has the good fortune of having a competent secretary of agriculture who knows how to deal with the rice problem. Recto and Agriculture Secretary Francisco Tiu Laurel, Jr give us the confidence we didn’t have last year when inflation and food supply problems arose. Good coordination between Recto who holds the money and Laurel who needs the money to implement his programs should help make the government look competent.

Recto said DOF would oversee the vigorous implementation of strategies under its REIN plan. This involves closely monitoring financial assistance programs or ayuda aimed at supporting vulnerable sectors and prioritizing the expeditious execution of the 2024 national budget to enable the timely implementation of measures aimed at enhancing agricultural production, especially during the peak of the El Niño which is forecasted in March.

The finance chief is also taking a special interest in enhancing the efficiency of beneficiary identification.

They also plan to accelerate the implementation of the El Niño Mitigation and Adaptation Plan.

Most importantly, the government will be able to ensure timely and sufficient imports of key commodities based on more frequent analysis of demand and supply conditions while combating anti-competitive practices.

In his first week in office, Secretary Laurel launched a diplomatic campaign to convince India to exempt us from their rice export ban. As a result, the Philippines secured the largest share of its rice importation agreement with India, securing 295,000 metric tons (MT) to augment the country’s rice supply out of the 1.03 million MT total rice exports to be distributed among seven countries.

Then recently, BBM was able to sign a five-year Rice Trade Cooperation deal with Vietnam, to access 1.5 million to two million MT of rice annually at a competitive and affordable price. This agreement will help ensure a steady supply of rice in the near term.

To help mitigate oil inflation over the medium term, Recto said the government will issue guidelines for the voluntary increase of ethanol blend for gasoline, which could help decrease the cost of gasoline. This is where Sec Ralph is badly misinformed.

If Sec Ralph wants to decrease the retail price of gasoline, the government must suspend the requirement to blend ethanol with gasoline. Ethanol is more expensive than gasoline and domestic ethanol is more expensive than imported ethanol. It is likely that some independent gasoline retailers are able to significantly cut their retail prices because they don’t add ethanol to the gasoline they sell.

Nevertheless, Recto promised that fuel subsidies will be released to drivers and operators in a timely manner. Guidelines will also be issued to exempt trucks bringing agricultural products from increases in toll rates.

It is a welcome change to have cabinet members addressing issues that matter to us. And it helps that they are also able to communicate better than most technocrats who are appointed to high level government positions. We can be hopeful for a good year ahead unless some demented soul from Davao continues to create new anxieties with his reckless talk.

 

Boo Chanco’s email address is [email protected]. Follow him on X or Twitter @boochanco

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