DOF eyes MIF as alternative financing option

The Maharlika Investment Fund (MIF) would be the alternative source of government financing once the Philippines becomes an upper-middle income economy, which disqualifies the country from less expensive development loans, the Department of Finance (DOF) said.

Finance Secretary Benjamin E. Diokno said the Philippines will no longer be eligible for borrowing on soft terms from development partners, such as World Bank, once it graduated from a lower-middle income country to an upper middle-income economy.

For this reason, Diokno said there is the need for the Philippines to develop alternative sources of financing for its priority projects once official development assistance (ODA) financing dried up.

“The Philippines will soon graduate to be an upper middle income country, and as such will cease to be eligible to the relatively less expensive ODA which are only available to less developed countries,” Diokno said.

In his first State of the Nation Address in July 2022, President Marcos said his administration was looking to bring the Philippines to upper-middle income status by 2024, whose per capita income is at least $4,256.

Diokno also said that projects funded by the MIF will be less time consuming and risky since they are not subject to political review and approval, unlike those projects financed by the government.

MIF will fund the development of government priority projects, such as mass transit system, power grid distribution, energy transition from coal to renewable energy, waste-to-energy, among others, the finance chief said.

Diokno added that MIF financing is a better option than private sector solicited and unsolicited proposals, which by nature, are time consuming, subject to lengthy negotiation, court challenges, and more careful appraisal.

“As new sources for large priority projects are developed, the fiscal space of the national government will widen. This means more resources of government might be allocated for investment in human capital ( education, health and nutrition) and social protection,” he said.

Meanwhile, Diokno enumerated sources of initial funding of the MIF, which exclude dividends of existing government corporations (GOCC).

“Without relying on the dividends of existing GOCCs, most of which have already been identified as sources of financing of the national budget, I can think of at least $5 billion worth initial financing for the MIF,” the DOF chief said.

First on the list is P100 billion from the Bangko Sentral ng Pilipinas, P50 billion from Land Bank of the Philippines, and P25 b billion from Development Bank of the Philippines.

“Since the MIF can only be used for investment in infrastructure projects approved by the NEDA Board, I’m sure both investments by the LBP and the DBP will give a higher return on investment compared to what both institutions are getting right now,” Diokno said.

The finance chief is also looking at privatization proceeds, which is around P100 billion to P150 billion.

“There are other potential sources of funds, such as, but not limited to: A. Foreign-exchange (dollar , euro, yen) denominated infrastructure bonds for OFWs, Filipinos abroad, and foreign investors who would like to participate in Philippine nation building,” Diokno.

Royalties for mining sector, whose activities the Philippines recently opened, is also considered as funding source for the MIF initial capitalization.