Incurred

The implementing rules and regulations for the Maharlika Investment Fund have been reviewed and finalized. The administration tells us that the corporate structure for the Fund is being organized and should be completed before the end of the year.

No one seems sure, however, what higher yielding investment activities the Fund will engage in. Therefore, we do not know if the money put in by “investors” – namely, the P50 billion contributed by Landbank and the P25 billion by DBP – will be worth the cost the government banks have incurred.

The two banks’ “investment” in the Fund will seriously curtail their lending. This has serious repercussions on the whole economy’s performance.

One veteran banker calculates that the P75 billion contributed by the two government banks translates into a reduction of P500- to P600-billion of lending to the economy. That is about 4 to 5 percent of total loans extended by our banking industry.

Because the two government banks target their lending to small enterprises and finance local government projects, the decline in lending capacity translates into an output loss equivalent to 2 percent of GDP. That is major.

This is not a good time to take any more wind out of our economy’s sails. The latest numbers show that both our exports and our imports declined the past month. This could be indications of a slowdown.

It is impressive that the inflation rate in October declined to 4.9 percent from 6.1 percent the month preceding. This could be due to slackening demand in our consumption-driven economy. The PSA reported this week that the unemployment rate ticked up slightly.

The law creating the Maharlika Investment Fund was unduly harsh on the two government banks. It commanded them to turn in their contributions just five days after the measure became law. Being government banks, the two institutions promptly complied with the letter of the law.

It took some time for the IRR to be fashioned. Then the organization of the Fund was delayed a few weeks more to further review the IRR. In the meantime, the large contributions from LBP and DBP were kept at the Treasury and idled.

The two banks will earn nothing while the money is stashed at the