The Maharlika Wealth Fund (aka Maharlika Investment Fund) is still facing rough sailing within the President’s Cabinet with some asking for serious study and caution on funding sources.
While Speaker Ferdinand Martin Romualdez is pushing his cousin, President Marcos Jr. to certify as urgent the bill (which Romualdez authored) creating the Maharlika Wealth Fund, Chief Presidential Legal counsel Juan Ponce Enrile and Socioeconomic Planning Secretary Arsenio Balisacan are asking for further study on the final details of the proposed measure.
For one, Enrile proposed a “careful review” amid growing fears of the public over possible misuse of government funds. He said that measures should be in place to ensure the integrity of the planned P275-billion sovereign wealth fund.
(That's why I told the President, Mr. President, let's study it carefully because) that will be written during your time. Maybe your successor would not understand your good aspirations and squander the fund then you would be blamed because you signed the law," he added.
Balisacan said the use of the gross international reserves and lowering the reserve requirement of banks to finance the Maharlika Investment Fund (nee Maharlika Wealth Fund) “may limit the tools at the disposal of BSP during times when inflation is high.”
In his Commission on Appointments hearing on Tuesday, Balisacan said the GIR and the adjustments in the reserve requirements of banks are important instruments of the BSP to implement monetary policy.
Senator Chiz Escudero asked if Balisacan would back proposals to use the GIR and adjust the reserve requirement to allow banks to invest in the MWF in lieu of the removal of pension funds from financing the sovereign wealth funds.
Escudero observed that the country had the highest reserve requirement among its peers and some high-income countries, at 12.2 percent.
“If you believe there is high inflation and part of that is because of high liquidity, that’s [reserve requirement] one instrument [BSP can use to cool inflation]. I wouldn’t want the Bangko Sentral to lose these instruments,” Balisacan said.
Balisacan also said banks’ investments in general must be diversified to minimize risk, in response to Escudero’s question if he was in favor of allowing banks, including government financial institutions, to invest all their funds in the MIF.
“I don’t think that’s a good idea, your honor. The portfolio of the bank has to be diversified enough, to allow it to absorb [shocks],” Balisacan said. “But I think what the fund could do is to diversify its possible sources of [financing].”
Balisacan also said the impact of drawing the financing for the MIF through the National Budget would largely depend on which part of the budget will be drawn from.
If the funds are sourced from infrastructure projects, as used in the example of Escudero during the hearing, Balisacan said it may be more useful to finance infrastructure projects immediately rather than wait for the returns from the MIF.
Ultimately, Balisacan believes the funding sources for the MIF could be created over time. He said he is already studying the possible ways to do this.
Earlier, the economic managers of the Marcos Jr. administration urged Congress to fast-track passage of the MIF, which they claimed would lead to a more “prosperous” Philippines.
Finance Secretary Benjamin E. Diokno said the world economic managers are backing the passage of the MIF, which they described as “long overdue.”
Diokno explained, however, that the BSP will only be required to contribute 50 percent of its declared dividends to the MWF starting from the third year to allow it to build up its capitalization to P250 billion. This means that 50 percent of the BSP’s declared dividends shall go to the national government, which in turn will be used to prop up the central bank’s capitalization, Business Mirror earlier reported.
Tags: #MaharlikaWealthFund, #NEDA, #PresidentialcounselJPE, #FinanceSecretary, #issues