The Philippine central bank’s ability to rein in inflation will remain unhampered despite a proposal for the monetary authority to contribute to a wealth fund that could delay its capital increase, according to Governor Felipe Medalla.
“Our balance sheet is currently quite strong that postponement of equity infusion will not affect our ability to achieve price and financial stability,” Mr. Medalla said in a text message late Tuesday.
The revised version of the bill proposing to establish the Maharlika Investment Fund requires the Bangko Sentral ng Pilipinas to contribute all of its annual dividends into the wealth fund for the first two years. For subsequent years, the proposal states that the central bank may put in just half of its dividends and use the other half to increase the monetary authority’s capital.
The national government has the authority to decide how much of the dividends remitted by the central bank will be used to increase its capitalization, Mr. Medalla also said.
A law increasing the Philippine central bank’s capital to P200 billion ($3.6 billion) from P50 billion was enacted in 2019 to further boost its capability to carry out its price and financial stability mandate amid the financial system’s growing sophistication. The capital hike will come from national government infusion out of the central bank’s dividends. — Bloomberg