MANILA - Congress must first enforce an older law that requires the central bank to raise its capitalization to P200 billion before it should be required to contribute to the Maharlika Wealth Fund, an economics professor said on Monday.

In 2018, lawmakers passed a bill that increased the capitalization of the Bangko Sentral ng Pilipinas to P200 billion from P50 billion.

Proponents of the Maharlika Wealth Fund revised the proposal after criticisms over using funds from the Government Service Insurance System and the Social Security System to fund the MWF. Among the main sources left is the BSP.

UP Los Banos Senior Lecturer of Money and Banking Enrico Villanueva said GSIS and SSS balance sheets showed that they do not have surpluses and that their investible funds are already being invested.

In 2021, BSP's capital is about P130 billion, reserves were pegged at P100 billion "set aside" to cover special purposes. That leaves pure capital of P50 billion.

"The capital of the central bank is supposed to cover potential losses in the conduct of its monetary operations," he said.

Losses can run up to P69 billion historically, he added.

"What I’m hoping the Congress will do… not to tinker with the BSP, honor its earlier law to increase the [capitlization] to P200 billion," Villanueva said.

"In the older law, after it reached 200 billion that’s the time the central bank can remit the dividends to the national government, so first do that," he added.

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Villanueva also cited previous learning from the old central bank which was made to cover losses of loans, foreign exchange and private companies.

"In short, those are not things that central banks do but it was made to do that under political pressure. That’s why we’re concerned...Congress in 2018 or 2019 already enacted a law to increase its capital to P200 billion.They made that law precisely because of that incident before, back then we learn from experience that we should build up the central bank and have enough capital," he said.

Meanwhile, Villanueva said that the reduced MWF capital of P110 billion from P250 billion is "quite small" compared to other sovereign wealth funds, but is acceptable if that's what the country could afford.

"Let’s be realistic, if that’s what we can then let’s start small… let’s build from it. It’s a safer way to do it, start small. While still small, fix management standards and governance standards and then let it grow," he said.

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