Maharlika Fund: Some fundamental issues MBOpinions READ:
, its method of sourcing funds could destabilize public finance and ultimately raise our national debt;, it could further worsen governance and patronage. In other words, there is a great likelihood of market failure.Governments create wealth or investment funds to pursue special goals when they enjoy a balance of payments surpluses, official foreign currency operations, proceeds from privatizations and fiscal surpluses, and windfall receipts from commodity and metal sales.
GFIs’ investible funds earmarked to MIF are deductible from their regulatory capital. Therefore, these GFIs could be constrained from both lending to key areas of the economy and investing in other infrastructure and social development projects. This could then lead to contagion and trigger a series of bank runs, especially now that the banking system’s balance sheets have arguably weakened due to the pandemic.
Some argue that even with a mere ₱50-billion capitalization, the BSP has succeeded in maintaining price and financial stability by expanding its balance sheet. Given the on-going pandemic, the large fiscal deficit, and higher public debt, coupled with the sustained uncertainty in the global markets, it is important to ensure that the BSP’s balance sheet remains appropriately disciplined.
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