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Wednesday, June 7, 2023

‘MIF to fill in gap when PHL as UMIC loses ODA’

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THE proposed Maharlika Investment Fund (MIF) will allow the Philippines to expand its financing sources, especially when it becomes an upper-middle income state, a status that restricts it from tapping “less expensive” Official Development Assistance (ODAs).

Finance Secretary Benjamin E. Diokno cited this as one of the MIF’s benefits if the controversial sovereign wealth fund, now being tackled in the Senate, becomes a reality.

“On the ODA, the Philippines will soon graduate to be an upper middle income country (UMIC), and as such will cease to be eligible [for] the relatively less expensive ODA which are only available to less developed countries,” Diokno explained in a statement on Sunday.

“In brief, the Philippines has to develop alternative sources of financing for its priority projects as ODA financing dries up,” Diokno added.

He reiterated that the MIF will widen the national government’s fiscal space, allowing it to develop more “large priority” projects at faster scale and boost investments in other key areas of the economy.

“This means more resources of government might be allocated for investment in human capital (education, health and nutrition) and social protection,” he said.

“As a result of the scarring effect of the pandemic, upskilling and retraining of our young population have high social and economic payoff. In an aging world population, our young people—tech-savvy, easily trainable, and mostly English speaking—are our most formidable asset,” he added.

Diokno also emphasized that the MIF may finish key infrastructure projects like a mass transit system and energy transition from coal to renewables faster than the usual funding routes the national government is currently undertaking.

“Financing through the [General Appropriations Act] is lengthier and risky since this is subject to political review and approval; the ODA, private sector solicited and unsolicited proposals are by nature, time-consuming, subject to lengthy negotiation and court challenges, and more careful appraisal, will continue,” he explained.

Diokno said the national government has no problem financing the initial $5-billion fund of the MIF.

He listed the possible funding sources for the sovereign wealth fund as follows: P100 billion from the Bangko Sentral ng Pilipinas, P50 billion from Land Bank of the Philippines (LandBank), P25 billion from the Development Bank of the Philippines (DBP), and P100 billion to P150 billion from privatization proceeds of the national government.

Diokno noted that the investments from the LandBank are just 3.8 percent of the bank’s P1.3-trillion investible fund while DBP’s counterpart would be 3.1 percent of its total P800-billion investible fund.

Diokno pointed out there are also other potential sources of the MIF such as, but not limited to, foreign-exchange denominated infrastructure bonds and the royalties from the mining sector.

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