Only 40% of LGU borrowing capacity used in 2022

MANILA, Philippines — Local government units continued to underutilize their borrowing capacities, as only 40 percent of the total was sought last year, according to the Bureau of Local Government Finance (BLGF).

Latest data from BLGF, an attached agency of the Department of Finance, showed that new debt applications by LGUs reached P38.35 billion in 2022.

This is equivalent to 188 certificates of net debt service ceiling and borrowing capacity, including seven amendments.

These were issued to 142 municipalities, 32 cities, nine barangays, and five provinces. Across LGU type, cities had the highest total loan requirement at P16.9 billion.

However, the data also showed that LGUs continued to have a low appetite for borrowing.

This, as borrowing capacity last year was at P98.85 billion, which means that only 38.79 percent or less that P40 billion of the amount was actually applied for by LGUs.

Most common loan projects were earmarked for the procurement of heavy equipment, acquisition of lot, farm-to-market roads, and infrastructure projects.

Of the LGUs last year, Calabarzon had the biggest loan application at P6.18 billion, followed by Central Luzon with P6 billion. Both regions utilized less than half of their borrowing capacities at around P13 billion.

Finance Secretary Benjamin Diokno has called on LGUs to come up with capital investment plans following the devolution of functions.

Diokno said local governments must enhance and optimize their increased transfers in setting up plans on capital investments to address basic and growing needs of their people.

This, as the Mandanas Ruling raised internal revenue allotment transfers to LGUs and ordered that all national taxes should be included in computing the tax base in determining the allocation for LGUs.

The Mandanas Ruling, likewise, strengthened the autonomy of LGUs, granting them the ability to borrow resources to improve local facilities and services.

To encourage local borrowing, the BLGF issued the certificate of net debt service ceiling and borrowing capacity to establish a maximum credit amount that LGUs can refer to.

The initiative is part of the government’s engagement with the World Bank, where LGUs will be given access to knowledge and tools to design creditworthy local strategies in planning and implementing capital investment projects.