Manila offers loans to convert bus and taxi engines

MANILA (Reuters) - The Philippine government said on Monday it would lend up to 1 billion pesos ($22 million) to owners of taxis and buses to convert their diesel engines and cut their reliance on costly imported fuel.

Concerned about the political fallout from soaring inflation, President Gloria Macapagal Arroyo is trying to alleviate the impact on poor Filipinos from rising prices of fuel, food and other basic commodities.

"They can use (the money) to finance the engine conversion from diesel to liquefied petroleum gas, compressed natural gas and other alternative fuels," Arroyo said at a launch for more environmentally friendly public vehicles.

Annual inflation is expected to keep rising after hitting a nine-year high of 9.6 percent in May. International oil prices at more than $130 a barrel, double what they were a year ago, are one of the main culprits.

The Philippines imports more than 90 percent of its fuel needs, helping the trade deficit to balloon to $2.1 billion in the first three months of the year compared to a $181 million surplus a year ago.

Arroyo said she wanted 10,000 taxis, buses and jeepneys or mini-buses, to use cheaper and cleaner alternative fuels.

Petron, the country's largest refiner, sells diesel at 49.39 pesos ($1.10) a liter compared to around 31 pesos for a liter of LPG.

Last month, Arroyo scrapped her long-held goal of a balanced budget this year and said she would raise spending to support flagging economic growth and overburdened consumers.

Earlier this month, the government announced a one-time cash subsidy for poor families to meet electricity bills at a cost of around 2 billion pesos.

The Philippines, the world's largest rice importer, has also been hard hit by a near trebling of international rice prices because of export curbs by some producer nations.

Manila has spent $1 billion this year buying up rice overseas and selling it at a discounted price to poor Filipinos, who rely on the staple to survive.

Around a third of the Philippines' nearly 90 million people live on less than $1 a day.

(Reporting by Karen Lema; Editing by Carmel Crimmins and David Fogarty)