Philippines Cuts Rice Tariffs, Impacts on Market

Quick Look

  • Tariff Reduction Announcement: The Neda board has taken a significant step by cutting rice tariffs from 35% to 15%, which should immediately impact lowering rice prices.
  • Expected Price Impact: The retail price of rice could drop by P6 to P7 per kilo, easing inflationary pressures.
  • Support from Lawmakers: Lawmakers back the initiative, with government-run Kadiwa centres aiding distribution.
  • Inflation Context: High rice prices contributed significantly to the April inflation rate of 3.8%, necessitating this intervention.
  • Comprehensive Tariff Program: This tariff reduction is part of a broader strategy to stabilise prices and control inflation from 2024 to 2028.

In a significant move aimed at alleviating the burden of rising rice prices on Filipinos, the National Economic and Development Authority (Neda) board has decided to reduce rice tariffs substantially. This decision, led by Agriculture Secretary Francisco Tiu Laurel Jr., marks a pivotal moment in the administration’s efforts to make rice more affordable for the nation’s poor.

“We will do everything within our power to ensure that the substantial cut in rice tariffs translates into a significant reduction in the retail price of the grain,” declared Secretary Francisco Tiu Laurel Jr. following the Neda board’s decision. This announcement highlights the government’s commitment to ensuring that the tariff reduction directly benefits consumers, particularly those from lower income brackets. By lowering the tariff from 35% to 15%, the administration aims to reduce rice prices to as low as P29 per kilo. This will offer significant relief to many households struggling with food costs.

The Mechanics Of Tariff Reduction

The previous 35% tariff on imported rice has significantly driven high retail prices for rice in the country. By cutting this tariff to 15%, the government aims to mitigate the effects of rising global rice prices and address the compounded impact of the tariff. Neda Secretary Arsenio Balisacan explained, “If we don’t reduce the tariff, with the increasing world prices compounded by the 35-percent tariff over and above that, prices and inflation will remain a very serious problem.” This move is expected to buffer against inflation and ensure that rice remains affordable for the average Filipino.

Support From Lawmakers

Lawmakers have also shown their support for this strategic decision. Speaker Martin Romualdez praised the initiative. The government-run Kadiwa centres, which sell affordable agricultural products, will be crucial in distributing rice at lower prices. They will ensure that the benefits of the tariff cut are felt across the country.

Anticipated Price Changes

The reduction in tariffs is expected to lead to a notable decrease in rice prices. According to the Philippine Statistics Authority (PSA), the retail price of rice could decrease by P6 to P7 per kilo. At the same time, the Department of Agriculture (DA) estimates a decrease of P4 to P5 per kilo. These projections offer a hopeful outlook for consumers grappling with high rice prices, particularly in a country where rice is a staple food item.

Inflation And Rice Prices

Rice prices have been a significant contributor to inflation in the Philippines. Per the PSA, the inflation rate in April was 3.8%, with rice alone contributing 1.75 percentage points to this figure. The inflation rate for rice stood at a staggering 23.9% in April, slightly down from 24.4% in March. These figures highlight the critical need for interventions such as tariff reductions. It will help stabilise the market and ease inflationary pressures.

Looking Forward: The Comprehensive Tariff Program

The tariff reduction on rice is part of a broader strategy encapsulated in the new Comprehensive Tariff Program from 2024 to 2028. This programme addresses various economic challenges by adjusting tariffs on essential commodities to stabilise prices and control inflation. Secretary Balisacan noted that the Philippines would continue to face severe inflation issues without such measures. External price shocks and high tariff rates drive these issues.

In conclusion, cutting rice tariffs is a timely and necessary step towards making this staple food more affordable for Filipinos. Additionally, with strong support from government officials and lawmakers, the anticipated reduction in rice prices will bring much-needed relief to many households. This initiative addresses immediate concerns about rising food costs. Furthermore, it lays the groundwork for more sustainable economic policies in the coming years.

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