BSP airs concerns on Maharlika fund’s impact on PH gross reserves, bank supervision

Warren de Guzman, ABS-CBN News

Posted at Dec 05 2022 09:56 PM

MANILA - The Bangko Sentral ng Pilipinas on Monday said it was concerned over how the Maharlika fund may impact the central bank’s management of the country’s gross reserves and its supervision of banks.

Under the proposed Maharlika Wealth Fund, the BSP is required to make regular contributions equivalent to 10 percent of remittances from overseas Filipinos or roughly $3 billion. 

BSP Monetary Board Member Bruce Tolentino said this has bearing on the Philippines’ gross international reserves (GIR).

"Now for the GIR, you will know and it's been obvious in the last few weeks that we have needed the GIR to help manage volatilities in the exchange rate,” Tolentino said.

The BSP had to increase its intervention in the foreign exchange market, Tolentino said, because of the pressure exerted by the US Federal Reserve’s aggressive interest rate hikes. 

The Fed’s rate hikes are blamed for weakening the peso, which plunged to as low as P59 to the US dollar in early October. 

“As you will see last year our GIR was close to $110 billion. Now it is down to $95 billion. We have expended some ammunition and we would like to try our best to preserve that ammunition for future battles," Tolentino explained.

Regarding its supervision of banks, Tolentino said the BSP also wants to ensure that “DBP and Landbank remain strong.” 

“We will check on the potential issues that have to do with their investments, potentially in Maharlika because we would like to apply the rules in so far as it applies to all banks," he added.

However, Tolentino said the BSP supports efforts by the national government to create more opportunities to invest or spend on nation building.

“BSP supports any effort by the National Government to broaden and widen its fiscal space. Lord knows we need it," he said.

Philippine economic managers said the MWF "will be used by the government to invest in a wide range of outlets such as foreign currencies, fixed-income instruments, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects, among others.” 

Various sectors earlier criticized the MWF saying it puts the money of pensioners at risk, and that it is prone to corruption.

Even the President’s sister said she was “worried” over the proposal. A lawmaker also said the fund life of the SSS was not considered in the MWF.

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