Only 18 LGUs allocated borrowed funds for COVID-19 fight

Only 18 local government units (LGUs) have borrowed for their COVID-19 response in 2020 despite available financing to augment their budgets in fighting the pandemic.

Data from the Department of Finance’s Bureau of Local Government Finance (DOF-BLGF) showed the 18 certificates of net debt service ceiling and borrowing capacity the agency issued for pandemic-related borrowings last year had an aggregate loan requirement of P16.3 billion.

Provinces borrowed P12.4 billion for COVID-19 response; cities, P2.7 billion; and municipalities, P1.2 billion.

“The proposed projects for COVID-19 response include procurement of equipment and medical supplies for testing, construction of clinics and hospitals, procurement of electronic equipment for students, support to local farmers, among others,” the BLGF said in a statement on Wednesday.

Local governments have to give the BLGF the heads up before they can borrow money from government financial institutions (GFIs) and banks. These are captured in the form of certificates of net debt service ceiling and borrowing capacity.

Borrowing capacities

In all, 258 LGUs availed of credit financing last year, up 64.3 percent than in 2019, the BLGF said.

For the entire 2020, LGUs applied to borrow a total of P80.9 billion, even as their aggregate borrowing capacities amounted to a bigger P201.9 billion, the BLGF added.

“The BLGF has also been analyzing the pandemic’s effects on the local fiscal position of LGUs and advising them accordingly on options to comply with the 20-percent statutory limitation on debt servicing, as required under the Local Government Code of 1991,” the agency said.

“Under the Local Government Code and DOF regulations, LGUs are authorized to contract loans, credits, and other forms of indebtedness with any government or domestic private bank and other lending institutions to finance local infrastructure and other socioeconomic development projects,” it added.

Among those that have extended credit lines to LGUs at the height of the COVID-19 lockdowns last year were the Land Bank of the Philippines and the Development Bank of the Philippines.

‘Bayanihan grants’

The Department of Budget and Management (DBM) also announced earlier it released “Bayanihan grants” amounting to P6.2 billion to the country’s 82 provinces. The amount is equivalent to a half month of the provinces’ internal revenue allotment (IRA).

About P30.8 billion of these grants, equivalent to a one-month IRA, were also released to 146 cities and 1,488 municipalities.

These Bayanihan grants to LGUs are to be used to buy personal protective equipment, testing kits, medicines and vitamins, hospital equipment and supplies, food assistance and relief goods, among other pandemic-related expenses.

But the DBM had said, “based on the initial reports on fund utilization and status of implementation of programs, activities and projects submitted by the recipient LGUs to the DBM, it has been noted that there is a relatively low utilization rate of the allocations of the LGUs from the Bayanihan grant.”