DOF urges LGUs to tap loan facilities for infrastructure

MANILA, Philippines — The Department of Finance (DOF) has urged local government units (LGUs) to tap three state-backed loan facilities to fund the implementation of their infrastructure and development projects.

In a letter to the League of Provinces of the Philippines (LPP), Finance Secretary Carlos Dominguez said the national government is committed to aid LGUs in implementing their projects through loan facilities being offered by the Land Bank of the Philippines, Development Bank of the Philippines (DBP) and the Municipal Development Fund Office (MDFO).

“The DOF stands ready to assist our LGUs in efficiently and effectively implementing their priority development projects that are crucial to the fulfillment of President Duterte’s primary goal of providing a safe, decent, and comfortable life for every law-abiding Filipino,” Dominguez said.

Dominguez, in his letter addressed to LPP national chairman and Quirino Gov. Dakila Carlo Cua, informed LGUs of the guidelines and requirements of such facilities.

For one, the finance chief said LGUs may tap Landbank’s Omnibus Term Loan Facility (OTLF) which is intended to fund infrastructure and socioeconomic projects listed in their approved Local Development Plan and Public Investment Program. 

The OTLF eliminates the associated transaction costs in securing loans for projects to be implemented, according to Dominguez.

Dominguez said the DBP can also provide loans to finance priority projects of LGUs.

He said the loan amount can reach up to 100 percent of the total project cost, but not exceed a barangay’s net debt service ceiling and borrowing capacity, as certified by the DOF’s Bureau of Local Government Finance (BLGF).

He said the DBP has helped finance various LGU projects, such as the construction of school buildings, market places, administration offices, multipurpose halls, sports complexes and hospitals.

The MDFO, an agency under the DOF, also offers concessional financing and technical assistance to LGUs, provided that their loans should be within their borrowing capacity. 

The finance secretary said LGUs, for instance, may avail of the Disaster Management Assistance Fund (DMAF) for their disaster prevention and mitigation initiatives.

The MDFO also provides loans to finance social and environmental projects, solid waste management facilities, sewerage and sanitation facilities, and other infrastructure projects, he added.

To encourage LGUs to avail of loans, Dominguez issued on Oct. 25, 2016 Department Order 054.2016, which streamlined the certification of the net debt service ceiling (NDSC) and borrowing capacity (BC) of LGUs.