More LGUs set to borrow funds for projects, says BSP

MANILA  -Local governments across the country saw a surge in their efforts to borrow funds for their projects, mainly infrastructure, in the first semester this year compared to the second semester of 2022, according to the Bangko Sentral ng Pilipinas.

The BSP said in a statement this may have been due to the revival of LGUs’ plans and projects after a mandatory pause in the runup to the national and local elections held in May 2022.

LGUs consult — or seek the opinion of — the BSP’s Monetary Board on their proposed domestic borrowings. In doing so, the LGUs state the amounts and intended purpose of the proposed loans.

The New Central Bank Act of 1993, as amended, requires government units to request an MB opinion on the monetary and external sector implications of their proposed borrowings before taking any steps to secure the funds.

This process enables the BSP to monitor trends in public sector debt and assess their impact on the monetary sector and external payments position of the economy.

BSP data show that in the first semester of 2023, the central bank received a total of 138 requests for the MB’s opinion on LGUs’ proposed domestic borrowings amounting to P43.1 billion.

This meant an 84-percent increase in the number of requests from the 75 received in the second half of last year.

In terms of aggregate amount, there was a 173-percent surge from P15.8 billion worth of proposed borrowings.

“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 BSP said.

The latest batch of requests were lodged by 109 town councils worth a total of P16.1 billion; 21 cities with P24.1 billion; four provinces with P2.9 billion; and four barangays with P21.5 million.

The LGUs that sought the go-ahead from the central bank were mostly in Central Luzon, Calabarzon and Western Visayas.

Out of the requests received over the past year, from July 2022 to June 2023, the MB rendered its opinion on proposed borrowings of 126 LGUs totaling P41.0 billion.

The opinions issued were related to 115 requests received in the first half of 2023 and 11 received in the second half of 2022.

“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 BSP said.

According to the central bank, 64 percent of the proposed borrowings were intended for infrastructure projects such as the construction and/or improvement of farm-to-market or access roads as well as bridges, public markets, multi-purpose buildings, commercial centers, health care facilities or hospitals, school buildings, solid waste management facilities, water system and septage treatment, and drainage and sewerage systems.

Also, one-fifth of the proposed borrowings were intended for the acquisition of heavy equipment and procurement of service vehicles.

The rest of the proposed loans were related to the acquisition of lots and/or site development for the eventual construction of various buildings and facilities; installation of various e-governance systems; and for refinancing outstanding obligations.