LGU loans hit P19.7 billion in first half of 2022

MANILA, Philippines—Local governments borrowed a total of P19.7 billion in the first half of 2022, mainly to finance infrastructure projects.

The latest data from the Department of Finance’s Bureau of Local Government Finance (DOF-BLGF) on Friday (July 15) showed that the agency issued 111 certificates of net debt service ceiling and borrowing capacity to the same number of local government units (LGUs) from January to June.

As proof of their capability to repay loans, LGUs must secure these certifications before they can borrow from government financial institutions (GFIs).

Among the LGU-borrowers during the first six months were three provinces, 22 cities, 81 municipalities, as well as five barangays.

The BLGF said these 111 LGUs had a total borrowing capacity of P43.9 billion, which meant they would unlikely default on their obligations.

As of end-June, cities had the biggest combined loan requirement worth over P8 billion, as well as the largest total borrowing capacity of P24.7 billion.

In June alone, nine LGUs — one province, two cities and six municipalities — borrowed P2.6-billion. June’s LGU-borrowers had a combined borrowing capacity of P5.7 billion or twice higher than the total amount of loans they sought.

BLGF data showed that the nine LGU borrowings last month were for infrastructure projects, like roads and bridges, hospitals and health centers, public markets, barangay halls, flood control and drainage, water supply systems, covered basketball courts, and the purchase of heavy equipment, among others.

Back in April, BLGF executive director Niño Raymond Alvina told the Inquirer that financing for infrastructure projects was the most common loan purpose in the certificates his agency issued from 2020 until this year.

The Marcos administration plans to spend a total of P1.19 trillion, equivalent to 5.5 percent of gross domestic product (GDP), on public infrastructure development this year.

President Ferdinand Marcos Jr’s economic managers had said that their plan to tap the public-private partnership (PPP) mode of funding infrastructure projects would also benefit LGUs as they could free up more fiscal space while assuming more devolved functions with the implementation of the Supreme Court’s Mandanas-Garcia ruling in full swing.

TSB