MALACANANG has certified anew the Maharlika Investment Fund bill as an urgent measure, even as its chief sponsor continued to be grilled on issues such as delaying the central bank’s capitalization buildup to allow it to contribute to the MIF.
Finance Secretary Benjamin Diokno heaved a sigh of relief, saying that the country is in the “best possible time” to establish the proposed sovereign wealth fund.
The Palace certification, dated May 22, allows lawmakers from both chambers to fast-track final plenary approval, clearing the way for the President to sign the measure to be enacted into law.
The MIF bill was passed earlier by an overwhelming majority in the House, after the Palace certified the House version.
In the letter to the Senate leadership read on the floor on Wednesday, the Palace stressed the urgency of creating the Fund, noting how global developments have constrained efforts to fund vital projects that could help the local economy’s growth goals.
By next week, the Senate is targeting to pass the MIF bill before going on recess on June 3.
It was conveyed to senators that the Executive is keen to see its enactment into law ahead of the President’s next State-of-the-Nation address before a Joint Session of Congress in late July.
The Department of Finance (DOF) welcomed the certification as urgent the passage of the Maharlika Investment Fund (MIF) bill at the Senate, claiming that the country is in the “best possible time” to establish the proposed sovereign wealth fund.
In a statement on Wednesday evening, Finance Secretary Diokno emphasized two reasons on why the creation of MIF comes at an “opportune” time.
First, Diokno argued that the fund would “strengthen the economy’s resilience through investment-led growth” amid a foreseen slowdown in the global economy. Citing the International Monetary Fund, Diokno noted that the world economic growth would just be at a “mere” 2.8 percent this year.
“While our macroeconomic fundamentals are intact, we must take advantage of robust instruments to cement our growth momentum through investments in strategic, economically viable, and high-impact infrastructure and other development projects,” he said.
Diokno added that the government is in the right position to “take advantage” of the “ample” liquidity of its financial institutions, which have investible funds.
Senators on Wednesday spent most of the session interpellating Banks committee chairman Sen. Mark Villar, main sponsor of the measure.
He had to repeatedly assure Sen. Sherwin Gatchalian that the bill’s mandating the BSP to contribute to the MIF’s seed fund will not impair the central bank’s ability to respond to shocks in the local financial system.
“A change in tune will not reflect well on the credibility of the BSP,” Gatchalian repeatedly said, as he asked both Villar and the economic managers to justify how the BSP had a “change of heart”—from hastily begging senators in 2016 to approve the buildup program raising BSP’s capitalization, then only P50 billion, to now saying that they can live with delaying such buildup, if only to allow BSP to chip in to Maharlika.
Villar explained that since 2016, authorities have had more flexibility in building up BSP’s capitalization, and the more urgent concern now is priming the economy, which is struggling to recover from the pandemic while dealing with high inflation. “From a whole-of-nation approach, there’s really need to prime the economy at this point, especially after Covid 19,” Villar said, adding that this “would require us to look for additional sources for spending,” especially for infrastructure.
Villar insisted that there is no intent to derail the BSP capitalization, “but we’re doing something to prevent us from entering a worse” economic condition in the short and long term.
Gatchalian recalled BSP Deputy Governor Vicente Aquino saying in 2016 that there’s a need to hike BSP capitalization from P50 billion to P250 billion.
He noted a 12-fold growth in the total banking resources since 1993, when the BSP was created from the old central bank, while the size of BSP’s balance sheet ’s has also grown eightfold since its creation in 1993.
“Despite all this, the authorized capitalization of BSP has remained P50 billion, which has taken more than 20 years to be fully subscribed.”
Majority Leader Joel Villanueva also weighed in on the need to consider the impact of delaying the BSP capitalization
“How prepared is BSP in absorbing shocks given its P50-billion capitalization?” he wanted to know, adding that if companies routinely undergo stress tests, a similar exercise should be done with BSP and the banking system.
For his part, Sen. Chiz Escudero asked to see documents showing that the envisioned Maharlika Investment Council which will run the fund, meets the constitutional requirements for creating a new GOCC.
Image credits: Joseph Vidal/Senate PRIB