Inflation-indexed cash grants to boost consumption — IBON

A PHILIPPINE government plan to raise cash grants to the poor by indexing these to inflation amid spiraling prices is expected to boost the economy through increased consumption, a think tank said on Wednesday.

“The measure will boost household spending among recipient groups and contribute to gross domestic product growth,” Jose Enrique “Sonny” A. Africa, executive director of think tank IBON Foundation, said in a Facebook Messenger chat.

“Household spending has been conspicuously slowing since last year partly because of higher inflation and falling family incomes especially among the poorest,” he said.

The Philippine economy grew by 5.6% last year, falling short of the government’s 6-7% target as high interest rates tempered private consumption, which accounts for about three-fourths of the economy.

Household spending growth slowed to 5.6% from 8.3% a year earlier.

Social Welfare Secretary Rexlon T. Gatchalian on Tuesday said the state should consider the effects of inflation, which averaged 6% last year, breaching the central bank’s 2%-4% target.

He said President Ferdinand R. Marcos, Jr. has ordered the agency to ensure that social grants, especially the government’s flagship cash transfer program Pantawid Pamilyang Pilipino (4Ps), keep up with inflation.

An index-based mechanism should be completed immediately, he said. “We know that inflation hits the bottom 30% of our population more.”

Inflation slowed to an over three-year low of 2.8% in January, the second straight month it fell within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.

“The suggestion to make social grants like 4Ps automatically indexed to inflation is very much welcome, especially in light of persistent inflation which is the top concern of Filipinos,” Enrico P. Villanueva, who teaches money and banking at the University of the Philippines Los Baños, said via Messenger chat.

“If welfare grants can be properly indexed to inflation, then the application and implementation of the concept may also be considered in other realms like wages,” he added.

The Philippine Senate on Monday approved on third and final reading a bill pushing for a P100 ($1.78) across-the-board minimum wage increase for workers in the private sector.

Under the 4Ps program, which provides conditional cash transfer to poor households for as long as seven years, a qualified child enrolled in daycare and elementary school gets at least P300 a month.

Beneficiaries in junior high school get at least P500 monthly, while those in senior high school get at least P700. It also gives qualified households a health and nutrition grant of at least P750 a month.

The program, which is patterned after cash grants in Latin America and African countries, started under former ex-President Gloria Macapagal Arroyo in 2006 and was institutionalized by her successor, the late Benigno S.C. Aquino III. It became a law in 2019.

Once the index is approved by economic managers, it will be introduced to the Legislative Executive Development Advisory Council, Mr. Gatchalian said.

“Most parties seem to acknowledge the positive impact of the suggestion on the poor, but operational concerns have to be resolved,” Mr. Villanueva said.

The Philippine Institute for Development Studies is mandated to recommend to the National Advisory Council whether cash grants should be adjusted.

The council must ensure that the aid is sufficient to “make a positive impact on health, nutrition and education,” according to the law.

“The formula for adjustments should also be considered in the budgeting process,” Mr. Villanueva said, citing the need to develop clear rules for 4Ps adjustments.

CASH OVER RICE
Also on Wednesday, congressmen urged the Social Welfare department to continue its distribution of cash aid instead of rice.

Distributing rice instead of cash raises procurement issues and could delay the aid, Marikina City Rep. Stella Luz Q. Quimbo told a news briefing.

“Cash is easier to distribute,” the lawmaker, who is also a senior vice chairperson of the House of Representatives committee on appropriations, said in Filipino. “The problem with rice is an agency would still have to procure it, and we know that we are not good in procurement.”

Agriculture Undersecretary Roger Navarro earlier suggested the distribution of rice aid to 4Ps beneficiaries.

“If you give cash to a poor family… it will still be allotted to your most basic need, which is rice,” Ms. Quimbo said.

Mr. Gatchalian earlier said it would be “logistically hard” to distribute rice. “We’re not saying no. Studies are ongoing, but taking into account the logistics needed so that our countrymen won’t suffer.”

Party-list Rep. JC Abalos said the government has systems in place for beneficiaries to receive cash grants.

Local regular milled rice costs P50.35 a kilo, while local well milled rice costs P52.21 a kilo, according to the Agriculture department’s latest price watch. Prices of imported regular milled and well milled rice are P50 and P54.26, respectively.

Mr. Abalos said a House measure seeking to adjust 4Ps cash grants for inflation has been fine-tuned by a technical working group for consideration by the plenary. — Kyle Aristophere T. Atienza and Beatriz Marie D. Cruz