Gov’t expects P6-B French loan for LGUs

The government will sign a 100-million euro or almost P6-billion loan agreement with a French aid agency for a program aimed at making Philippine local government units (LGUs) more fiscally responsible.

In a statement, the Department of Finance (DOF) said the upcoming loan from Agence Française de Développement (AFD) would partly finance the Local Government Finance and Fiscal Decentralization Reform Program, Subprogram 2 (LGFFDR2).

Besides the AFD, the multilateral lender Asian Development Bank will also provide $250 million in counterpart financing to the program.

“The 100-million euro program loan from AFD is proposed to be extended to the government in recognition of the latter’s efforts to achieve inclusive growth and reduce poverty by creating a conducive fiscal framework for inclusive growth; developing an adequate and equitable resource framework for fiscal sustainability; strengthening public financial management to assist efficient local government unit service delivery; and fostering good local governance, transparency and accountability,” the DOF’s International Finance Group (IFG) said in a recent report to Finance Secretary Carlos G. Dominguez III.

According to the DOF-IFG, all activities, policy actions and indicators necessary to facilitate the disbursement of the LGFFDR2 had already been successfully achieved by the government.

As such, the DOF-IFG expects disbursement of the AFD loan as early as the fourth quarter of this year, or by the first quarter of next year, at the latest.

“The LGFFDR2 aims to achieve inclusive growth and reduce poverty via improved service delivery by LGUs, through proposed revision of the 1991 local government code and the creation of a conducive fiscal framework for inclusive growth, the development of an adequate and equitable resource framework; strengthening of public financial management for efficient LGU service delivery; and reinforcement of good local governance, transparency and accountability,” the DOF-IFG said.

Data on the ADB’s website showed that the first subprogram, which had a project cost of $401 million, secured $250 million from the Manila-based lender on top of the $150 million obtained from the AFD in 2014.