IMF to gov’t: Restore capital of state-owned banks used for Maharlika fund
MANILA, Philippines – The International Monetary Fund (IMF) has called on the Philippine government to restore the capital of the LandBank of the Philippines and the Development Bank of the Philippines (DBP), which were used to fund the Maharlika Investment Corporation (MIC), a key program of the Marcos administration, “as soon as possible.”
“Implementing capital restoration plans for two state-owned banks following their contribution to the Maharlika Investment Corporation’s start-up capital and exiting regulatory relief as soon as possible is important,” the IMF said in its annual report. (You can read the full report here.)
The IMF noted that while the funds from LandBank and DBP could support the country’s investments, they should not come “at the cost of a resilient financial system, a sound regulatory framework, and a level playing field.”
LandBank and DBP infused a total of P75 million in capital to the MIC, with P50 million and P25 million from each bank, respectively.
The IMF’s report adds to the ongoing debate about the governance and long-term sustainability of the MIC.
The Maharlika Investment Fund is a sovereign wealth fund designed to support the government’s investments in key sectors such as domestic and foreign corporate bonds, commercial real estate, and infrastructure projects, helping to finance the country’s priority programs. The law establishing the MIC took effect in September 2023. Critics have slammed the law’s passage, arguing it was rushed by the government despite the absence of adequate safeguards.
A strongly-worded discussion paper by the University of the Philippines School of Economics said the Maharlika fund “violates fundamental principles of economics and finance and poses serious risks to the economy and the public sector – notwithstanding its proponents’ good intentions.”
Despite the criticism, President Ferdinand Marcos Jr. has continued to promote the fund to investors. At the 2023 Asia Summit in Singapore, the President said that the Maharlika Fund would pool unused government funds to finance investments without increasing the country’s borrowing. – Rappler.com