LGU borrowings more than double to P43 billion in H1

MANILA, Philippines — The amount borrowed by local government units (LGUs) from domestic creditors more than doubled to P43.1 billion in the first half of the year from P20.2 billion in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data showed the central bank’s Monetary Board received a total of 138 requests for opinion from LGUs on their proposed loans in the first semester of 2023, 29 percent higher than the 107 requests received in the same period in 2022.

“The significant increase was likely due to the resumption of government plans and projects a year after the conduct of the national and local elections in 2022,” the central bank said in a statement.

As part of its continued adherence to transparency and good governance, the BSP releases information on the issuance of Monetary Board opinions (MBOs) on the proposed domestic borrowings of LGUs.

During the six-month period this year, the requests for MBOs came from 109 municipalities with P16.1 billion, 21 cities with P24.1 billion, four provinces with P2.9 billion, and four barangays with P21.5 million.

From January to June this year, the Monetary Board rendered its opinion on 126 LGU proposed borrowings worth P41 billion. This covered 115 requests received in the first half of the year, and 11 requests received in the second half of last year.

According to the BSP, the remaining 23 requests received in the semester under review are awaiting the submission of complete information and/or documentary requirements by the borrowing institutions.

The central bank said majority of the loans at 64 percent were intended for infrastructure projects, including the construction and/or improvement of farm-to-market or access roads and bridges, public markets, multi-purpose buildings/ business/ commercial centers, healthcare facilities or hospitals, school buildings, solid waste management/materials recovery facilities, water system and septage treatment, and drainage and sewerage systems.

The BSP added that 20.5 percent of the total LGU borrowings were intended for the acquisition of heavy equipment and procurement of service vehicles, while 15.3 percent were allocated for the acquisition of lots and/or site development for the eventual construction of various buildings or facilities, as well as the installation of various e-governance systems.

Calabarzon emerged as the biggest borrower with a total of P5.84 billion, followed by Western Visayas with P5.8 billion, Central Luzon with P5.12 billion, Central Visayas with P3.78 billion, the National Capital Region (NCR) with P3.53 billion

The biggest borrowers were Bacolod City in Negros Occidental with P4.17 billion, followed by Caloocan City in NCR with P3.33 billion, Santa Rosa City in Laguna with P3.12 billion, Bais in Negros Oriental with P1.69 billion, Angeles City in Pampanga with P1.5 billion, Surigao del Sur with P1.5 billion, Minglanilla in Cebu with P1 billion and Sarangani province with P1 billion.

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

The provision requires the government, its political subdivisions or instrumentalities, to request the Monetary Board to render its opinion on the monetary and external sector implications of their proposed loans prior to undertaking any credit operation.

This provision of the law 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.