The Department of Finance (DOF) warned that keeping rice prices artificially low for a long time could have negative effects.

Finance Secretary Benjamin E. Diokno said implementing price ceilings on rice could help control rising prices in the short term, but such intervention should only be temporary.

“Price control works only in the near term,” Diokno told Manila Bulletin on Tuesday, Sept. 5. “If allowed to linger for longer it leads to some unwanted consequences.”

Diokno cautioned that prolonged price controls would lead to a decrease in the supply of staple food, discourage farmers from planting, and cause importers to refuse rice imports.

“[This is] because the suggested domestic retail price is lower than the implied landed costs of imports,” he said.

In business terms, the phrase "near-term" typically refers to a period of a few weeks, possibly months, or even less.

Last Sunday, the National Economic and Development Authority (NEDA) said the price ceilings for rice would be a temporary measure.

“We are confident that the imposition of a price ceiling is only a temporary measure. We expect the rice harvest to commence soon and anticipate that other initiatives will produce the desired result,” the NEDA said.

On Tuesday, Executive Order No. (EO) 39 went into effect, establishing price limits of P41 per kilo for regular milled rice and P45 per kilo for well-milled rice. However, special and premium rice are not subject to any limits.

Earlier, the Foundation for Economic Freedom (FEF) cautioned that implementing price ceilings would have negative consequences for Filipino consumers, farmers, and the economy.

Instead, FEF suggested that the government should consider reducing import tariffs from 35 percent to 10 percent as a more effective solution to address the rising rice prices.

However, Diokno defended President Marcos' order, stating that EO 39 is intended to manage the upward pressures on rice prices.

“Price controls on rice through EO No. 39 serve as a short-term measure against non-competitive practices by some market players,” Diokno said.

“Price controls, when carefully calibrated and closely implemented, are effective in the near-term,” he assured.

Meanwhile, farmers are worried about the price ceiling, as they fear lower prices will result in traders buying their fresh harvest at reduced prices, making it difficult for them to repay their loans.

But Diokkno said the government recognized the price control's adverse impact on rice retailers and farmers.

“It is crucial that the government ensures sufficient rice supply at reduced prices, avoids non-competitive behavior in the rice industry, and pursues targeted programs to protect vulnerable sectors,” the DOF chief said.

Furthermore, Diokno said the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO) is monitoring the trends in both food and non-food inflation.

He said the IAC-IMO's monitoring will enable the national government to identify and execute appropriate measures to alleviate inflationary pressures in a timely and appropriate manner.