BSP: Maharlika Wealth Fund Could Affect Gross International Reserve Management

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The Bangko Sentral ng Pilipinas (BSP) expressed its concern over the proposed Maharlika Wealth Fund (MWF), where the Central Bank is required to regularly contribute equivalent to 10% of the remittances from overseas Filipino workers (OFWs)—that is about $3 billion.

According to the BSP, MWF can hardly affect its two functions: managing the country’s gross international reserves (GIR) and its supervision of banks.

Gross International Reserves Management

“Now for the GIR, you will know and it’s been obvious in the last few weeks that we have needed the GIR to help manage volatilities in the exchange rate,” said BSP Monetary Board Member Bruce Tolentino. 

Tolentino further explained that the BSP had to increase its intervention in the foreign exchange market because of the pressure exerted by the US Federal Reserve’s aggressive interest rate hikes. 

“As you will see last year our GIR was close to $110 billion. Now it is down to $95 billion. We have expended some ammunition and we would like to try our best to preserve that ammunition for future battles,” he clarified.

Last October, the peso weakened to 59 against $1 because of the US Federal Reserve’s rate hikes. 

However, Finance Chief and former BSP Head Benjamin Diokno has the same opinion in this issue, saying that the country’s monetary authority has “too much” gross international reserves (GIR) and some could be used for the proposed MWF. 

Supervision of Banks

“We will check on the potential issues that have to do with their investments, potentially in Maharlika, because we would like to apply the rules in so far as it applies to all banks,” Tolentino added.

Though the BSP Board Member did not mention a piece of detailed information about the MWF, he assured that the Central Bank wants to ensure that the two state-owned banks, the Development Bank of the Philippines and the Landbank of the Philippines, will remain strong. 

The BSP is not alone in expressing its concerns over the proposed MWF. Even Senator Imee Marcos, the President’s sister, said that she is worried about the proposal. 

Opposition Senator Risa Hontiveros also emphasized that the money that will be used for the MWF, can instead be used for the education, healthcare, and agriculture sectors. 

However, despite his statements about the Central Bank’s concerns on the proposed MWF, the BSP Monetary Board Member expressed that it will still support “the efforts of the national government to create more opportunities to invest or spend on nation building.”

“BSP supports any effort by the National Government to broaden and widen its fiscal space. Lord knows we need it,“ he concluded.

BSP Statement on GIR

The BSP has sent the following statement about GIR: 

The country’s gross international reserves (GIR) level, based on preliminary data, settled at US$93.95 billion as of end-November 2022 slightly lower than the end-October 2022 GIR level of US$94.03 billion.[1] The latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.[2] Moreover, it is also about 6.9 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.[3], [4]    

The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) payments of its foreign currency debt obligations and the Bangko Sentral ng Pilipinas’ net foreign exchange operations.

Similarly, the net international reserves, which refers to the difference between the BSP’s reserve assets (GIR) and reserve liabilities (short-term foreign debt and credit and loans from the International Monetary Fund (IMF)), decreased marginally by US$0.06 billion to US$93.93 billion as of end-November 2022 from the end-October 2022 level of US$93.99 billion.

This article is published on BitPinas: Maharlika Wealth Fund Could Affect BSP’s Gross Reserve Management, Bank Supervision – Central Bank

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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