By Keisha B. Ta-asan, Reporter

THE former governor of the Bangko Sentral ng Pilipinas (BSP) said the Maharlika Investment Fund (MIF) will likely cause the Philippines to take on additional debt as there is “no wealth to manage.”

Ex-governor Felipe M. Medalla made the remarks at a forum organized by the University of the Philippines School of Economics (UPSE) on Friday.

“I really thought that there’s no wealth to manage. (According to the) rules of accounting, any money that goes (into the fund) is taken from somewhere else. Since somewhere else is financed by borrowing, then that’s clearly borrowing. Either that or someone else will suffer,” he told reporters on the sidelines of the forum.

The MIF is expected to be operational by early 2024, Finance Secretary Benjamin E. Diokno earlier said. The MIF law was signed by President Ferdinand R. Marcos, Jr. in July.

The MIF draws capital from the National Government as well as from the two big government banks — the Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP).

“Anything that goes to the fund is additional borrowing because the entire country has a deficit. Even the BSP dividends. That dividend goes to the National Government, and it reduces the borrowings of the National Government,” Mr. Medalla said.

“So, if those dividends go to Maharlika, then the government has to borrow more,” he said.

He also noted that if LANDBANK and DBP are required to invest in the fund, it will lower demand for government securities as both banks are major buyers of government securities.

Mr. Medalla said he wanted no part in the discussions leading to the creation of the MIF last year, especially when the initial proposal involved the use of the BSP’s dollar reserves as seed money for the fund.

He eventually signed off on the measure after legislators made changes to the Maharlika bill. These included giving the fund a stronger mandate to invest in strategic projects, rather than serving as a wealth management fund.

Mr. Medalla said another risk is that the fund’s moves will have an outsized impact — positive or negative.

“If they do good things, they’ll be very impactful. If they do bad things, it will also be impactful. So, at any rate, the law is there now and let’s see how it can be less a danger to the economy in the future,” he said.

Mr. Medalla also said the UPSE was not remiss in speaking out against the fund, describing the process of setting up the fund “too fast.”

“In fact, my impression was the President himself was not sold on the idea (at the time he knew he was going to be President) but not yet in office. At that point, he was not really sold on the idea yet,” he said.

“So, to me the curious thing is what happened between that and (the time he expressed his support),” he added.

Separately, Mr. Medalla expressed concerns about rising wages, which he said could put pressure on small businesses.

“First, many firms are really incapable of paying (their workers), so what do you do, exempt them? But then it won’t be a minimum wage anymore,” he said.

“This is the problem if the minimum wage is too high. It’s like saying everyone should wear size 6 shoes,” he added.

A P40 wage hike in the National Capital Region took effect on July 16. Pending wage hike petitions elsewhere in the country will likely be decided by September.

Mr. Medalla said if other businesses can pay their workers more, increases should be subject to negotiation.

“One-size-fits-all will be tough for the bottom part of the economy. You will be forcing them to either act illegally (to) survive, or seek exemption. But if you’re going to give exemptions, is that (still a) minimum wage?,” he said.