LGU borrowings soar by 70% in 2021

MANILA, Philippines — Domestic borrowings of local government units (LGUs) surged by 70 percent to P102.9 billion in 2021 from P60.5 billion in 2020 to bankroll key infrastructure projects, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP rendered an opinion on 391 requests from LGUs on their proposed loans last year, 79.3 percent higher than the 218 requests in 2020.

Section 123 of Republic Act 7653 or the New Central Bank Act of 1993, as amended by RA 11211, mandates prior opinion of the Monetary Board on the proposed borrowings of government entities including LGUs.

This provision stems from the BSP’s role as the government’s advisor on official credit operations. It enables the BSP to monitor trends in public sector debt and assess its impact on the monetary sector and external payments position of the economy.

Latest data showed the central bank processed 193 LGU requests for Monetary Board opinion in the second half of 2021, 2.5 percent lower than the 198 requests received in the first half.

However, the total loan amount increased by 18 percent to P55.7 billion from July to December last year compared to P47.2 billion from January to June.

The Monetary Board rendered its opinion on 206 LGU proposed borrowings totaling P56.4 billion. The said Monetary Board issuances were for 169 requests received in the second semester and 37 requests received in first semester.

Of the total proposed LGU loans issued with MB opinion, 70 percent was intended for infrastructure projects involving mostly the construction of multi-purpose buildings, public markets, water systems, farm-to-market roads and bridges, government buildings, health care facilities or hospitals and school buildings, among others.

There were also proposed loans for the acquisition of heavy equipment and procurement of rescue and/or service vehicles, which accounted for 20.5 percent of the total LGU loans.

Other proposed LGU loans, comprising 8.3 percent of the total, were allocated for the acquisition of lots and site development, while 0.5 percent was intended for loan take out or refinancing.

Finally, in support of the country’s pandemic response, 0.7 percent of the total proposed LGU loans were allocated for the construction of isolation facilities.

The City of Manila topped the list in terms of loan amount after it received an opinion for its proposed P10 billion borrowing for the construction of the Dr. Albert Elementary School, Rosauro Almario Elementary School, Manila Science High School, San Sebastian Residences, Pedro Gil Residences and San Lazaro Residences.

Marikina City followed with two loan packages worth P2.46 billion. It is borrowing P1.54 billion for a loan take-out from Lucio Tan-led Philippine National Bank and the construction of the Community Mall Phase 1 in Barangay Concepcion Dos as well as another P924.8 million for the completion of the community mall at Marikina Hotel Compound, the full settlement of the lot acquired at Gen. Ordo?ez, Barangay Parang, and the lighting of alleys and streets of various compounds and other infrastructure projects.

The province of Davao Oriental followed with two loan packages with a combined amount of P2.4 billion. These include the P1.39 billion loan to finance agriculture and fisheries projects, infrastructure projects, disaster preparedness projects, veterinary projects, provincial masterplan, and other projects.

The province is also looking at another P1.01 billion package for health-related projects, environment-related projects, tourism- related projects, other infrastructure projects, acquisition of various laboratory equipment and transport equipment, computerization upgrade and enhancement of revenue generation, financial and resource with digital archiving and content management systems modernization project, development of provincial database program, storage of server and database, and provision of laboratory and medical supplies and medicines.

On the other hand, the BSP rendered an opinion on the proposed P2.14 billion borrowing by the province of Cavite to bankroll its managed broadband network and the procurement of bandwidth.

The City of Tabuk in the Cordillera Administrative Region (CAR) is borrowing P1.92 billion to finance the construction of three-story 100-bed level 2 Tabuk City Hospital in Barangay Appas, improvement of various barangay roads from unpaved to paved, construction of two-story legislative building in Barangay Dagupan Centro, improvement of three-story city hall building and compound (phase II) in Barangay Dagupan Centro, and construction of three-story training center Balong Agro-Food in Barangay Balong.

Taguig is likewise borrowing P1.36 billion to finance the construction of Taguig General Hospital (Phase V) , a 15-storey Taguig City Hall with roof deck (Phase 3), multi-purpose evacuation centers (Phase 2), installation of metered streetlights, completion of a Novelty Park (Phase 2) in Barangay Bagumbayan, and upgrading of roads and drainages.