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DOF's Diokno: BSP has ‘too much’ reserves, could be used for Maharlika fund

The Bangko Sentral ng Pilipinas (BSP) had “too much” gross international reserves (GIR) and some could be used for the proposed Maharlika Investment Fund, Finance Secretary Benjamin Diokno said Monday.

According to Diokno, the country's current GIR was enough for 7.5 months of imports, surpassing the preferred 3 months' worth.

“Sobra sobra pa rin ‘yun,” he told reporters in Manila City, adding that at the current GIR level, “that’s too much ammunition.”

Latest data from the BSP shows that the GIR — a measure of the country’s ability to settle import payments and service foreign debt — stood at $94.074 billion as of end-October.

This is higher than the $93 billion recorded as of end-September, but lower than the $107.888 billion in the same month last year.

Diokno said the idea of a sovereign wealth fund was not new and he had  thought of it while he was still serving as the governor of the BSP.

“Noon pang nag umpisa ‘yan, because... at that time, we had 110 billion (dollar) reserves. Eh ini-invest namin sa abroad eh ‘pagka nag-return ang baba-baba eh,” he said.

“Maraming projects dito na ang return is 20%. Sana nagamit namin ‘yung ‘pagka may welfare fund,” he added.

(This started way back because... at that time, we had $ 110 billion in reserves, and we were investing abroad. But the returns were small.

There are a lot of projects here with a return of 20%. We could have used that if there was a welfare fund.)

Diokno expects the proposed Maharlika wealth fund to be passed into law by middle of 2023, as the schedule may be too tight for it to be approved within the month.

“Siguro not the end of the year kasi medyo tight. Siguro around middle of next year before the budget is approved,” he told reporters, in response to queries on the projected timeline of the measure.

Diokno said last week that the fund is seen to be operational six months from its enactment into law, but on Monday he said this may take some time to finalize the organization.

“It will take a while, io-organize pa ‘yung organization,” he said.

The economic cluster led by Diokno backed the proposed Maharlika Wealth Fund, which aims to allow the government to invest surplus reserves or revenues in real estate and financial assets.

Under the proposed measure, the fund will have an initial capital of P275 billion, coming from government financial institutions (GFIs) such as the Development Bank of the Philippines (DBP), the Government Service Insurance System (GSIS), the Land Bank of the Philippines (LandBank), and the Social Security System (SSS).

Other contributions are set to come from the BSP, and the Philippine Amusement and Gaming Corporation (PAGCOR), among others.

BSP Governor Felipe Medalla, however, was concerned about the Maharlika fund’s potential impact on the dollar reserves, along with the central bank’s independence.

“If they say we will take the central bank’s dollars, then what will you use now if your reserves are reduced because they’ve been taken for the wealth fund?” Medalla said in an interview with Bloomberg last week.

Medalla also flagged the risk of a repeat of the 1Malaysia Development Berhad (1MDB) set up in 2009, which was mired in a multi-billion dollar graft scandal with former Prime Minister Najib Razak sentenced to 12 years in jail.

Sought for comment, Diokno said that several critics of the proposed measure  had yet to read the proposal in full.

“Maraming mga ganon, nagko-comment na hindi pa nababasa ata ‘yung bill eh. So out of ignorance nagko-comment,” he said, but added that he was not refering to Medalla.

“It (BSP’s independence) will not be affected. So iniisip lang namin for example, pwede mong sabihin na siguro x percent ng OFW remittances ise-set aside for this kung gusto nila,” he said.

(There are a lot like this, making comments without reading the bill. So they are commenting out of ignorance.)

Diokno added that the prescribed amount of investments that GFIs put into the fund could be removed from the measure.

“Pwede mong tanggalin ‘yun eh, kasi may mga respective boards ‘yan eh. Let them decide kung magkano ico-contribute nila sa fund,” he said.

(You can remove that because they have respective boards. Let them decide how much they want to contribute to the fund.) — DVM/AOL, GMA Integrated News