Press Release
July 30, 2008

Loren committee to scrutinize government "dole-outs"

The Senate Committee on Economic Affairs chaired by Senator Loren Legarda will conduct a public hearing today on the government's subsidy program on fertilizer, fuel and power among others to determine their efficiency and whether the same reaches its targeted beneficiaries.

"We have to rationalize everything. We are talking of billions of pesos here. And we don't want to show the impression that we are not concerned anymore with our coffers," said added.

"What's happening is that the government is quick to allot funds for programs the disbursement of which are discretionary in nature, just because it sees huge windfall coming in from the value added tax collection. So we will look into the details of these programs," said Legarda.

Legarda is referring to the P4 billion Katas ng VAT and the other subsidies on fertilizer and fuel launched by the government. The Department of Finance said the government could collect P18.6 billion in additional VAT collections this year because of the soaring energy prices.

"The government should review the efficiency of its piecemeal approach in providing relief to low-income earners. Are all of these subsidies really needed? The word is priority. If we can institute corrective measures that will provide immediate, effective, sustainable and lasting relief of the Filipino consumers amid the continuing rise of food, fuel, and power costs, then we will do," Legarda added.

Reports also came out this month that the government is readying to release another round of financial assistance for the poor amounting to P4 billion. The amount will be drawn from the government's revenues from value added tax on oil from period April to June (second quarter).

According to Legarda, the government should enforce cost-effective mechanisms in spending the excess revenues it collected. It requires a balancing act and political will to deny the temptation of using these subsidies to gain approval from a distraught public. "We have plenty of pressing problems needing full attention, but are often neglected like education. And subsidies should not comprise most of the government's plan for the people to surpass this distressing time. The predicament we are in should make us realize our mistakes in the past," she said.

"We should opt for subsidies that are not "dole-outs" in essence. A similar hearing has also been set for the committee which will focus on the adverse impact of rising oil prices to the economy, price of basic commodities and the purchasing power of the Filipinos.

Reports have it that the country's oil companies have predicted the price of gasoline to reach as much as P65 per liter, as the oil groups seek to push for recoup from the spiraling prices of crude in the world market.

As of July 30, 2008, benchmark price of oil closed at US$127 per barrel after reaching its highest at $135. Still, the domino effect was felt as it easily triggered dramatic increase in prices of basic commodities that left the ordinary Filipinos and the poor with tighter budget for other basic needs such as food.

"The rising prices of oil and the concomitant increase in the prices of basic commodities necessitate action by the government to minimize the country's welfare losses," said Legarda, who also filed Resolution No 436.

Legarda cited the National Statistical Coordination Board's (NSCB) release that the country's Gross Domestic Product (GDP) in the first quarter of 2008 slackened to 5.2 percent from the previous year's 7.0 % performance.

Malacanang economic managers maintained that high oil prices and reduced global demand for some of the nation's exports have forced our economic team to reduce the target for GDP growth for this year to between 5.7 to 5.5 percent.

Based on national statistics, the inflation rate for all items in the Philippines reached 11.4 percent in June 2008, the highest since May 1994.

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