Emergency declaration risked signaling ‘distress’ to markets — ex-central banker

THE government could have held off before calling an energy emergency, with the Palace acting before the legal conditions were met for making such a declaration, GlobalSource Partners said.

In a commentary published late Monday, GlobalSource Principal Advisor Diwa C. Guinigundo, a former Bangko Sentral ng Pilipinas (BSP) deputy governor, said: “Rather than immediately declaring an energy emergency, a more measured and strategic approach could have been unmistakably pursued.”

“A well-articulated energy contingency blueprint could have achieved preparedness without signaling distress to markets and the public,” he added.

President Ferdinand R. Marcos, Jr. last week declared a yearlong state of national energy emergency via Executive Order No. 110.

Mr. Guinigundo noted that the Oil Deregulation Law provides for the declaration of a national energy emergency due to actual or imminent supply shortages, evidence of market failure such as hoarding or cartel behavior, and severe economic disruption or transport paralysis.

“At the time EO 110 was issued, these conditions were not fully evident,” he said. “The government itself described the situation then as a ‘price disruption,’ not a full-blown crisis.”

On the other hand, Marco Antonio C. Agonia, an economist at the University of Asia and the Pacific, called the government’s decision a “good first step” but cited the need to preserve confidence in the economy.

The emergency “grants powers to free up funding and oil procurement in an expedited manner,” he told BusinessWorld via e-mail. “The National Government needs to make good use of these provisions to anchor confidence in the Philippine economy.” 

Mr. Guinigundo said measures being contemplated once the government decides to exercise its emergency powers, such as suspending or cutting the fuel excise tax and lowering the value-added tax on petroleum products, “can directly cushion consumers and reduce inflationary pressures… However, the tax decision should be weighed very carefully because suspending the implementation of any tax measures means foregoing that part of public revenue.”

In a blog post published on Monday, the International Monetary Fund (IMF) said the disruption of energy shipments transiting the Strait of Hormuz, will have an outsized effect on “economies with weaker currencies and large energy imports” in much of Asia and parts of Latin America. 

The IMF said affected countries must adopt well-calibrated policies, noting that those with limited reserves and fiscal space should be more cautious. — Katherine K. Chan