Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla isn’t keen on investing the country’s foreign reserves in the multibillion-peso Maharlika Wealth Fund proposed by two of President Ferdinand Marcos Jr.’s relatives.
In an interview with Bloomberg TV, Medalla said the Philippines should take caution from Malaysia’s experience in creating its own sovereign wealth fund. Former Malaysian Prime Minister Najib Razak has been sentenced to 12 years in prison over the misuse of Malaysia’s 1MDB.
“To me the experience of 1MDB Malaysia is the biggest risk, right?,” Medalla said. “Even if the current guys are okay, will the guys five years from now still be okay?”
“It’s a governance issue. The other one is the extent it could affect the independence of the central bank,” he added.
Medalla said the country’s economic standing could be hurt by the possibility that the country’s reserves may be exposed to corruption because of the Maharlika Wealth Fund.
Dollar reserves provide a cover for import payments and are used as a measure of strength and stability of an economy. Its untimely depletion can lead to a chain reaction that could pull down economic growth and turn away inbound investments.
“If they say we’ll take the central bank’s dollars, then what we’ll we use if the reserves are reduced because they’ve been taken to the sovereign wealth fund?,” he added. “We’ll have less ammunition the next time there is an international volatility that is related to the peso and the dollar.”
“My personal view is unless we’re compelled, we should not [invest reserves there],” the central bank governor said.