PRESIDENT AQUINO OFFERS P4.23 BILLION SUBSIDY TO POOR FILIPINOS TO OFFSET HIGH FUEL PRICES

PRESIDENT AQUINO OFFERS P4.23 BILLION SUBSIDY TO OFFSET HIGH FUEL PRICES

MANILA | Sun May 1, 2011 4:51am EDT

MANILA May 1 (Reuters) - President Benigno Aquino offered 4.23 billion pesos ($100 million) in rice subsidy on Sunday to 10 million poor Filipinos to offset rising fuel and food prices as thousands of workers protested to demand wage increase on Labour Day.

In his Labour Day speech, Aquino unveiled a package of non-cash benefits, including extra funds to hire 80,000 students on summer break for temporary jobs and help 100,000 job-seekers find work at home and abroad.

The president rejected workers' proposals to repeal an oil deregulation law to allow the government to subsidise pump prices, because it could weaken the peso against the dollar and widen the fiscal deficit.

Instead he offered to distribute rice stocks from the state-owned National Food Administration to about 10 million poor people nationwide to cushion rising fuel and food prices.

"We are not promising the impossible," Aquino said in a Labour Day speech in Manila, adding it was not feasible to remove the deregulation law to bring down fuel costs.

"How can we do that if world crude prices are rising? Where will we get financing to cover for the price gap? Even if this can be done, it will lower cost artificially. The dollar will skyrocket and the peso will weaken."

Manila wants to narrow its fiscal shortfall to 3.2 percent of GDP, or 290 billion pesos, this year, from 3.7 percent of GDP, or 314 billion pesos in 2010, a record in pesos terms. [ID:nP9E7F601H]

The first quarter shortfall was less than a quarter the government's projected shortfall of 112 billion pesos, mostly due to spending being 82 billion pesos below target. [ID:nL3E7FQ1T5]

Aquino said state workers would get the third tranche of their salary adjustment a month earlier in June, but could not assure private sector workers on any increase in daily wages until public hearings by a regional wage boards are completed.

"We cannot remain deaf to the pleas of our minimum wage earners," he told leaders of dozens of workers' groups in a meeting at the presidential palace, asking regional wage boards to speed up actions on salary increase petitions.

Outside the presidential palace, thousands of workers marched to protest and demand salary adjustments to cope with rising inflation, saying they were unhappy with Aquino's rice subsidy offer.

Conservative labour unions had asked wage boards to approve 75-100 pesos increase in daily wages while left-wing groups had demanded a legislated 125 pesos across-the-board salary raise.

Aquino said delays in the salary adjustments had heightened labour tensions between management and unions. Labour officials, however, cautioned a wage increase of more than 25 pesos could have inflation impact.

The central bank has factored in a wage rise of 25 pesos into its forecast for inflation, which it already expects to be near the top of its 3-5 percent target band this year. [ID:nL3E7FP0P4]

The central bank raised interest rates in March, and many analysts think it could lift them against at the next review on May 5. The central bank has said it was ready to act to manage inflation expectations. [ID:nL3E7FJ02T] (Reporting by Manny Mogato; Editing by Andrew Marshall)

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