LGU loans more than tripled in H2

MANILA, Philippines — The proposed domestic borrowings of local government units (LGUs) more than tripled to P48.9 billion in the second half of 2023 from P15.8 billion in the same period in 2022, the Bangko Sentral ng Pilipinas (BSP) reported.

Data showed the central bank’s Monetary Board received a total of 159 requests for opinion from LGUs on their proposed loans in the second semester of 2023, more than double the 75 requests received in the same period a year prior.

The requests for Monetary Board opinions (MBOs) came from 123 municipalities with P15.9 billion, 20 cities with P22.6 billion, 11 provinces with P10.3 billion, and five barangays with P109.3 million.

From July to December 2023, the Monetary Board rendered its opinion on 143 LGU proposed borrowings worth P45 billion. This covered 125 requests received in the second half and 18 requests received in the first half.

The remaining 34 requests received in the semester are still under review. The central bank is waiting for the submission of complete information and/or documentary requirements by the borrowing institutions.

According to the BSP, most of the loans at 61.4 percent were intended for infrastructure projects, including the construction and/or improvement of farm-to-market/access roads and bridges, public markets, multi-purpose buildings/ business/commercial centers, health care facilities or hospitals, school buildings, solid waste management/materials recovery facilities, water system and septage treatment as well as drainage and sewerage systems.

Around 19.5 percent of the total loans were intended for the acquisition of lots and/or site development for the eventual construction of various buildings/facilities as well as permanent working capital for the acquisition of palay from small farmers as well as the acquisition and installation of various e-governance systems, among others.

Likewise, 19 percent of the total will be used for the acquisition of heavy equipment and procurement of service vehicles.

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  externally and on the monetary sector.