Determining the Foreign Exchange Cost to Government of Price Policy Interventions in Rice

Neriza  M. Delfino,

Determining the Foreign Exchange Cost to Government of Price Policy Interventions in Rice

Abstract:

The importance of agricultural pricing policy on the political landscape of a country like the Philippines, its implication to income distribution between the urban and rural sectors, and the level of production output generated in the countryside has brought into greater focus the effects that pricing policy makes on the efficient allocation of the country's scarce resources. As is generally observed, if a country's economic base lies in agriculture, the lack of political will or bureaucratic capacity to collect taxes directly makes price interventions in the agricultural markets an essential source of revenue.

The "impact of price intervention on certain interest groups justifies to a greater extent government's involvement in pricing. On the other hand, despite its obvious importance to the economic upliftment of more than half the country's population, political leaders tend to moderate their stand on economic policy measures of this nature to avoid appearing to harm any interest group. Unfortunately, the negative impact of this policy stance surfaces only after a period of time has lapsed, at times even without the benefit of knowing how the policy decision had been arrived at. The political impact is believed to be felt more rapidly than its economic impact, considering the pre-dominance of political party loyalties over economic group interests in the country's power structure.