THE Marcos administration’s economic managers reaffirmed their support for the Maharlika Investment Fund (MIF), saying it could serve as an alternative financing option for the government should the Philippines become an upper-middle income state — which would render it ineligible for cheaper borrowing from its development partners.
The chiefs of the Finance and Budget departments, National Economic and Development Authority (NEDA), and Bangko Sentral ng Pilipinas issued a joint statement on Tuesday, June 13, touting the creation of the MIF — the Philippines’ very first sovereign wealth fund — “as a vehicle for economic growth.”
The joint statement was issued weeks after the measure creating the fund was approved by Congress after the House of Representatives adopted the MIF bill’s Senate version during the bicameral conference committee meeting.
The economic managers said it “can serve as an alternative funding source to relieve the country from relatively higher interest rates imposed by alternative sources of financing” as “the achievement of upper-middle income status—a goal under the Medium-Term Fiscal Framework (MTFF)—will render the country ineligible to avail of the low-interest loans and grants that are offered to low-income and lower-middle-income economies.”
NEDA secretary Arsenio Balisacan earlier said the goal of becoming an upper-middle income economy might be achieved in 2025, a year later than previously expected, as the effect of the pandemic-induced recession is likely to temper growth.
Under the World Bank’s updated standards, an upper middle-income economy has a gross national income (GNI) per capita of between $4,046 and $12,535.
In 2019, the Philippines was categorized as a lower-middle income country with a GNI per capita of between $1,006 and $3,955.
“As an additional vehicle for financing, the MIF is expected to widen the fiscal space in the near- to medium -term as it reduces heavy reliance on local funds and development assistance as the main financing mechanisms for infrastructure projects,” the economic managers said.
“By providing an alternative source to public infrastructure spending, there would be a bigger budgetary allowance for other priority expenditures,” they said.
The economic team added that the Maharlika Invest Corporation (MIC) — a government-owned company that will manage the sovereign wealth fund — may invest in capital markets or sectoral investments “as a matter of investment strategy and policy that the lawmakers wisely afforded to the MIF Board.”
Other economists have expressed their concerns about the proposed fund, saying that its objective remains unclear, and that there appears to be some confusion about the source of the funds to be used.
Finance Secretary Benjamin Diokno, who believes the fund can be fully operational before the year ends, has said that while the Congress-approved version of the Maharlika bill prohibits government-run pension funds and health insurance from investing in the MIF, the Government Service Insurance System (GSIS) and Social Security System (SSS) would still be able to “subscribe” to the MIC’s activities on a project level if they deem it advantageous to do so.
Senate Minority Leader Aquilino Pimentel III, meanwhile, called for the bill to be recalled to address “glaring errors and discrepancies” in the “hastily approved” measure.
The economic managers also said that the MIF will allow government financing institutions to have an expected rate of return of around 8.6% on average, much higher than their cost of capital and the return in their current investment places. (GMA Integrated News)
