Hontiveros: Will Maharlika "liability fund" doom future generations of Pinoys to even bigger foreign debt?

Senator Risa Hontiveros today warned that the Maharlika Investment Fund (MIF) being pushed by the Marcos administration may instead become a "liability fund" that will balloon the nation's already enormous foreign debt and make life harder for present and future generations of taxpayers.

During the Senate Committee on Banks, Financial Institutions and Currencies hearing on the proposed bills creating the MIF, Hontiveros said that Filipinos will have to take on bigger foreign debts to establish the MIF, since no new source of funds for the project - which are not already dedicated to debt servicing or financing the annual budget - have been identified.

"We should perhaps instead call the MIF the "Sovereign Liability Fund" as it will be effectively funded by liabilities. There is also no assurance that the cost of borrowing will be lower than the yield to be generated by the SWF," Hontiveros said.

"The Philippines already has a high level of debt to finance government programs and no new sources of funds have come into consideration since the MIF discussions started. Instead of paying our debts, we are putting up an SWF, the effect of which is, the Philippines is borrowing more money for the SWF," she added.

During the hearing, National Treasurer Rosalia De Leon said that the government intends to attract more equities so offshore and domestic investors, including those from the private sector, will have long-term placements in the MIF and share in the risks of the fund. De Leon said that the additional funding in the form of equities can later reduce the fiscal pressure on government and eventually lower the country's debt matrix.

Hontiveros however pointed out that the Land Bank of the Philippines and the Development Bank of the Philippines (DBP) are already able to use their investible funds as equity for investments aligned with national priorities, even without the MIF. "Why weaken Land Bank and DBP by de-capitalizing them in favor of the MIF? I see no additional service by the Maharlika Investment Fund that DBP and Land Bank cannot render," she added.

What is missing, according to Hontiveros, "is a portfolio of Public-Private Partnership (PPP) and other strategic projects that are already showing good revenue streams that can attract equity from abroad, so that the government does not have to borrow all the time."

She also said that the MIF is sure to drastically expand the country's outstanding debt, which has already reached a record high of P13.644 trillion by the end of November 2022, due to government spending over the years outpacing revenue collections.

The senator then noted that the additional foreign debt burden to be created by the MIF is contrary to the Marcos administration's own plan of bringing down the nation's outstanding debt- GDP ratio from 63.7% down to 55% by the end of 2028.

"Taliwas ang dagdag utang na siguradong dadalhin ng MIF sa sariling plano ng pamahalaan na pababain ang foreign debt ng bansa. We would be better off strengthening existing economic and financial institutions and fulfilling our developmental aspirations," Hontiveros concluded.