The Department of Finance (DOF) has asked the National Food Authority (NFA) to immediately explain why it had procured palay stocks way below its projected buffer requirement in the second half of 2017 and revised its buying mix to heavily favor imports over rice from local farmers during the same period, despite ample funds at its disposal and a standby credit facility that it could have readily tapped to maintain its mandated buffer stock.
In a letter to NFA administrator Jason Aquino, the DOF said that based on a review of the agency’s financial records, the NFA received a P5.10-billion subsidy from the National Government (NG) in 2017, of which P3.01 billion was used to pay for accounts with the Bureau of the Treasury ((BTr), leaving a balance of P2.09 billion.
This P2.09 billion from the subsidy fund could have been rolled over and used to procure more rice to beef up the NFA’s inventory, but instead, the DOF found out that the agency used the money to pay for its short-term credit facility with the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP).
A review of the NFA’s cash position, without taking into account the P2.09 billion NG subsidy, also confirmed that the NFA had (1) a cash balance of P1.3 billion as of March 2017, which dropped to P1.2 billion as of end-June 2017; and (2) available NG-guaranteed facilities of P3.58 billion as of March 2017, which fell to P2.1 billion as of end-June 2017.
For its debt-servicing requirements in 2017, the NFA had a P5.4-billion advance from the NG that was favorably endorsed by the DOF to the BTr.
This amount was for the NFA’s obligations that matured in October and November of that year, so that its available NG-guaranteed credit facilities could be utilized to augment funds for rice procurement.
“Our analysis further shows that the NFA had ample resources coming from cash balances and available credit facilities, even without considering the subsidy receipts and uses, to procure the projected volume of local rice at least up to the third quarter under its May projection submitted to the DOF,” said Assistant Secretary Soledad Emilia Cruz of the DOF’s Corporate Affairs Group (CAG), in her Sept. 5 letter to Aquino.
The DOF-CAG is in charge of implementing policies affecting government-owned and controlled corporations (GOCCs) like the NFA, and in monitoring the cash flows of the government corporate sector.
Despite the availability of funds, in the second quarter of 2017 (April-June), when the NFA reported that its buffer stock was approaching critical levels, the actual palay procurement was only 6,331 MT versus the estimate of 22,552 MT, which was submitted by NFA to the DOF in May 2017.
Cruz pointed out in her letter that the actual palay procurement for the second semester of 2017 was only 13,714 metric tons (MT), which was much lower than the 151,129 MT projection that the NFA submitted to the DOF for the same period.
“In terms of mix of rice procurement, underlying assumptions in the revised May 2017 projection showed a mix of 68:32 in favor of imported rice. However, actual stock flow for 2017 resulted in a mix of 94:6, in favor of imported rice, which was a substantial drop in the share of actual local rice procurement compared with the May 2017 projections,,” Cruz further said in her letter.
Cruz bared that on top of its funds and NG-guaranteed credit facilities that the NFA can use if funds are insufficient to procure rice, the DOF can also provide NG advances for debt servicing or NG guarantees on the required additional credit to support the agency’s operations. Thus, the NFA was assured of enough funds to buy the projected volume of local rice at least up to the third quarter under its May projection.
The NFA is required to keep a buffer stock good for 15 days at any given time and a 30-day buffer stock during the traditional lean months of July to September.
Given its findings on the NFA’s cash flow and actual procurement done last year, the DOF told the agency to explain the following:
· the drop in actual palay procurement as against projection for the second quarter of 2017;
· the decline in procurement turnout for the rest of the year;
· the drop in the share of local rice procurement; and
· its failure to roll over its NG-guaranteed facilities so that it could have funds available to augment its rice procurement capabilities.
“We would highly appreciate receiving your immediate responses to our queries,” Cruz said in her letter to Aquino.