January 27, 2023

Eureka News

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Proposed LGU borrowing shrank to ₧20.2 billion

The value of local government units (LGU) borrowing shrank 63.7 percent in the first half of this year, the latest data from Bangkok Sentral ng Pilipinas (BSP) showed.

GNP data showed that total proposed borrowing from LGUs in H1 2022 was just P20.2 billion, compared to P55.7 billion LGUs requested in the same period last year.

Numerically, the BSP received only 107 requests for Monetary Board (MBO) opinions from LGUs in the January-June 2022 period, down 44.6 percent from the 193 requests for the same period in 2021.

In a statement, the central bank said the BSP is releasing information on issuing MBOs to LGUs for its planned domestic borrowing. This information includes the amount and intended purpose of LGUs’ proposed loans, she added.

The central bank further explained that the need for prior Board opinion on proposed borrowings by government entities, including LGUs, is required by law under Section 123 of Republic Act (RA) 7653, also known as the New Central Bank Act of 1993, as amended by RA 11211.

The BSP said the MB issued its opinion on 120 proposed LGU loans totaling 25.8 billion pesos during the reporting semester. These exhibitions concerned 98 applications received in the first half of this year and 22 applications received in the second half of 2021.

Of the total proposed LGU loans issued with Monetary Board opinion, 66 percent were allocated to infrastructure projects primarily to build and/or improve public markets, farm-to-market/access roads and bridges, and multi-purpose buildings, businesses and/or commercial centers.

Loans were also granted for water supply systems and sewage treatment plants, government buildings, health care facilities or hospitals, school buildings, public squares, parks, gymnasiums, covered squares and public transport terminals, among others.

Loans for the purchase of heavy equipment and procurement of rescue and/or service vehicles were also proposed, accounting for 23.6 percent of total LGU loans.

Other proposed LGU loans, accounting for 9.7 percent of the total, were allocated for land acquisition and land development; 0.3 percent was for borrowing or refinancing; and 0.3 percent of the total proposed LGU loans went towards building isolation facilities in support of the country’s response to the Covid-19 pandemic.

The BSP said section 123 of RA 7653 requires the government, its policy departments or bodies, to ask the board of directors to give its opinion on the monetary and external implications of its proposed lending before lending.

This provision of the law stems from the BSP’s role as adviser to the government on official lending transactions. It allows the BSP to monitor trends in public sector debt and assess their impact on the monetary sector and the economy’s external payments position.