Finance Secretary Benjamin Diokno said over the weekend there should be a “more aggressive” approach in the war against inflation that accelerated to a 14-year high of 8.7 percent in January.
Diokno said in a Viber message that while monetary authorities had already done their part, the war against inflation is an all-of-government campaign.
“The executive department, including LGUs [local government units], have to do more, be more aggressive and focused. In the fight against inflation, monetary policy is not the only game in town,” he said.
Diokno said the main sources of inflation remained on the supply side, which should be the responsibility of fiscal authorities. He said evidence of second-round effects increased, and the previous direct actions by government agencies had yet to work.
“The Executive Department and the LGUs should intensify the implementation of more direct, non-monetary measures to help address the supply issues,” he said.
“Our monetary policy is the most aggressive in the region and its impact is also working its way. From January 2022 to the most recent Monetary Board policy meeting, we implemented 400 bps [basis points] while it was only 250 bps for India, 225 bps for Indonesia and only 100 bps for Thailand and Malaysia,” he said.
Diokno listed a number of recent initiatives to fight further increases in consumer prices. These included the additional importation of sugar and onion. The plan is to import 440,000 metric tons of refined sugar to help bring down its price to P85 per kilogram.
He said some of the imported sugar would be released upon arrival to temper the high retail prices without hurting the farmers. About 200,000 MT of the imported sugar would be for consumer use, while 240,000 MT would be set aside for a two-month buffer stock.
Diokno said that for onion, prices were expected to gradually stabilize in the first and second quarters of 2023 with the arrival of imports intended to temporarily pacify the gap between demand and supply and the forthcoming peak harvest season of locally-produced onions.
“But timely importation of food items in short supply is not enough. There has to be a focused effort to ensure that the imported goods reach the intended markets as soon as possible. The Bureau of Customs should release the imported food items with the same sense of urgency that we have given the importation of COVID-19 vaccines,” Diokno said.
He said local authorities should facilitate, not impede, the movement of essential food items to the intended markets. He said restricting the free movement of essential food items is one sure way of prolonging inflationary pressures.
Diokno said the government planned to form a small technical working group—consisting of the National Economic and Development Authority, Department of Finance, Department of Budget and Management, Department of Trade and Industry and Department of Agriculture—for an objective and timely assessment of supply and demand conditions of key food items.
“This responsibility should be taken away from vested groups. This will help ensure timely actions to avert short-term upticks in food prices,” Diokno said.
Diokno said if the Executive Department succeeded in controlling the sources of inflation on the supply side more effectively, there would be less reason for monetary authorities to raise policy rates.
The Bangko Sentral ng Pilipinas on Thursday raised the benchmark policy interest rate by another 50 basis points to 6 percent to rein in inflation.