How can the government help protect citizens from the harmful effects of inflation?
Answer (1)
The government has several tools to protect citizens from the harmful effects of inflation, especially those from low-income groups. These tools fall under three main categories: monetary policy, fiscal policy, and social protection programs.First, the Bangko Sentral ng Pilipinas (BSP) uses monetary policy to manage inflation. When inflation is too high, the BSP raises interest rates. This makes borrowing more expensive, which slows down consumer spending and business expansion. As a result, demand falls, and prices begin to stabilize. This protects the economy from overheating and helps keep inflation under control.Second, the national government can use fiscal policy. For example, during periods of high inflation, it can reduce import taxes on goods like rice, meat, or oil to lower their prices. In 2023, the Philippine government reduced tariffs on pork and rice to address food inflation. It can also postpone increases in excise taxes (like fuel taxes) to lessen the burden on consumers.Third, the government runs social protection programs to help the most vulnerable. For instance, the Pantawid Pamilyang Pilipino Program (4Ps) gives cash assistance to poor households. During high inflation, the government may provide additional ayuda, fuel subsidies for jeepney drivers, or rice distribution programs to ensure people can still access basic needs.The government also adjusts minimum wages and pensions to help keep up with inflation. The Regional Tripartite Wages and Productivity Boards regularly review and increase the minimum wage based on inflation and living costs.Finally, price monitoring and enforcement is another method. The Department of Trade and Industry (DTI) and Department of Agriculture (DA) regularly check markets to prevent price manipulation or hoarding of goods.
