Maharlika Investment Fund seen cutting PH infra outlay

MANILA  -The Maharlika Investment Fund (MIF) might become a reason for the flow of investments into infrastructure to slow into a trickle instead of build up to a surge, contrary to what the Marcos administration expects.

According to the United Kingdom-based data and research firm Pantheon Macroeconomics, the proponents of the Philippines’ new sovereign wealth fund promise much in their proposal but the MIF “should not be mistaken as a panacea for much-needed reform to boost capital outlays.”

The Marcos economic team has been touting the MIF as a mechanism that would ramp up spending on infrastructure, and would free up funds that would give the government greater fiscal space to spend on development projects.

The government is yet to issue the MIF’s implementing rules and regulations, which officials said should come out by the second week of August.

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“Solving the infrastructure deficit, however, is not merely a financial problem,” Pantheon Macroeconomics said in a commentary.

Disbursements

Citing data from the Department of Public Works and Highways itself, the research firm noted that disbursements fall far short of budgeted amounts by roughly 40 percent to 60 percent.

“A low absorptive potential by public institutions points to a need to increase operational capacity, which will not be solved by simply increasing capital outlays,” the group said.

Also, Pantheon Macroeconomics expects a decrease in funds toward development projects in the short term.

Twin deficits

This is partly due to the MIF being seed funded with revenues from government financial institutions and the national coffers, the latter being ultimately a part of the national budget.

The group said the MIF has to contend with the Philippines’ twin deficits—on infrastructure spending and the budget—unlike other sovereign wealth funds, which are often funded sustainably by current account surpluses, typically by windfall from commodities like crude oil and minerals.

“Funding earmarked to capitalize the MIF would have otherwise gone into nontax revenues supporting the budget,” it added. “A diversion of these funds means fewer resources for the government and, with fiscal consolidation a priority, it’s highly likely that the end result will be a smaller public outlay for infrastructure.”

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Further, Pantheon Macroeconomics said the timing of the creation of the MIF “is slightly unfortunate” considering that interest rates in the Philippines have risen sharply on the back of the aggressive tightening of the Bangko Sentral ng Pilipinas’ monetary policy.

“If properly managed, the fund could add materially to government resources in the future, but its short-term impact on activity probably will be trivial,” the group said.

Marcos administration officials said the Maharlika Investment Corp., which would manage the MIF, may have secured at least P100 billion in seed funds as well as executives and staff by year-end, and would be up and running by early 2024. INQ