MANILA (UPDATE) - The government should return the contributions of state-led banks to the Maharlika Investment Fund (MIF), a former official of the Bangko Sentral ng Pilipinas said on Wednesday.

Former BSP Deputy Governor Diwa Guinigundo issued the statement after President Ferdinand Marcos Jr. paused the implementation of the Maharlika and ordered a review of the MIF.

Guinigundo told ABS-CBN News that the P50 billion of Landbank and P25 billion from DBP must be returned.

“In the first place, ‘yong pera ng Landbank at ng DBP is not exactly owned by the government. Deposito ‘yan ng publiko eh (Those are deposits by the public),” Guinigundo said.

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Guinigundo said that the suspension may have been rooted in the request of the two Government Financial Institutions (GFI) for regulatory relief from the BSP.

Both banks earlier sought regulatory relief for flexibility to comply with the capitalization requirement set by the BSP. The central bank said Landbank and DBP have requested regulatory relief despite still being compliant.

Guinigundo pointed out that without regulatory relief from the BSP, both banks will have to ease their lending.

“It is possible that these two GFIs are still compliant with the BSP requirements of 10 percent capital adeqaucy ratio. But because of their commitment to the MIF, bababa ang kanilang kapital and unless bigyan sila ng BSP ng regualtory relief (they're capital will go down unless the BSP grants them relief). Hindi sila makakapagpautang o bababa ang kanilang pautang (They won't be able to lend money or will be forced to cut back on lending),” Guinigundo explained.

“The second possibility is they may no longer be compliant with the BSP requirements and therefore there is an urgency for the BSP to grant them regulatory relief,” he added.

For Guinigundo, Marcos’ decision to step on the brakes on the implementation of MIF is a welcome development. But the government will have to decide on Maharlika's fate soon.

“I hope they will just drop the whole idea of the Maharlika Investment Fund. I think the President was right in suspending the implementation of MIF and I support that decision of the President. But while the President is doing it, I suggest tingnan talaga kailangan ba ng MIF (they should study if the MIF is really needed)?” Guinigundo said.

“I hope tignang mas maigi ito and the government should decide once and for all whether to keep it or drop it,” he said.

The Development Bank of the Philippines confirmed in a statement that it has received the Palace memorandum on the suspension.

“The DBP shall strictly abide by the directive,” the DBP statement said.

A tax advocacy group also welcomed Malacañang’s decision to suspend the implementation of the MIF while urging the government to fully scrap the law that mandated the creation of the country's first sovereign wealth fund.

The Freedom from Debt Coalition (FDC) said it was not the right time to launch an investment fund amid global and domestic economic headwinds.

“Siguro pumasok sa calculation nila, unstable, uncertain ang economic situation ngayon,” said FDC President Rene Ofreneo.

(I guess they saw it in their calculations that the economic situation is unstable, uncertain.)

“Even dito sa Pilipinas, nakita niyo ‘yong performance ng ating stock market, tumatagilid. Parang talagang wrong timing,” added Ofreneo.

(Even in the Philippines, our stock exchange isn't doing super well. It's like wrong timing.)

Ofreneo hopes that as the MIF undergoes review, the government will come to the decision to scrap it altogether.

“Sabi nila postponed. But we hope that finally ay mai-scrap,” he said.

(They say it's postponed, but we hope that it will finally be scrapped.)

--with a report from Andrea Taguines, ABS-CBN News