Local government units start to borrow more

The clock tower of the Manila City Hall is seen in this file photo, Jan. 9, 2017. — REUTERS/ERIK DE CASTRO

Beatrice M. Laforga, Reporter

LOCAL GOVERNMENT UNITS (LGUs) are ramping up their borrowings in order to fund more programs as the pandemic continues, the Bureau of Local Government Finance (BLGF) reported.

Based on preliminary data on the first two months of 2021, the BLGF issued 53 certificates of net debt service ceiling and borrowing capacity to LGUs, who are planning to borrow a total of P14.927 billion. This amount is higher by 116% than the P6.9-billion proposed loan amount a year ago.

LGUs who want to apply for loans from lending institutions to finance proposed projects are required to get the certificate of net debt service ceiling and borrowing capacity from the BLGF.

Thirty-six municipalities are planning to borrow more this year, as the BLGF issued borrowing certifications worth P4.1 billion. Seven cities are proposing to secure loans worth P6.6 billion, while six provinces want to borrow P4.3 billion. Four barangays are seeking P36.4 million in loans.


Cities had the largest borrowing capacity with P22.1 billion as of the January-February period, followed by provinces (P14.1 billion); municipalities (P8.6 billion); and barangays (P71 million).

In February, the BLGF released 27 borrowing certifications to LGUs for proposed loans worth P5.35 billion, more than triple the P1.74 billion seen in the same month of 2020.

LGUs’ total borrowing capacity stood at P20.58 billion, climbing 390% from P4.2 billion a year ago.

In February, municipalities had the highest loan availment of P2.52 billion, while cities still had the biggest borrowing capacity of P14.07 billion.

“We can attribute (the increased availment of loans) to several factors, but it basically depends on the timing of LGUs’ plan or decision when to tap credit or loan as a financing option for their capital investment and expenditure requirements, based on their program of financing for their local development projects,” BLGF Executive Director Niño Raymond B. Alvina said in a text message to BusinessWorld last week.

“The webinars and online public information campaigns conducted by various organizations in 2020 on credit financing could also have contributed to the increase in LGUs’ awareness and interest to consider loans as a viable financing option, subject to their borrowing capacities,” he added.

Mr. Alvina said 20% of the total loan amount availed by LGUs last year were meant to fund the pandemic response programs.

Finance Secretary Carlos G. Dominguez III told LGUs late last year to maximize their borrowing capacity to finance their programs and projects, as well as boost their local economies.

Data showed the majority of the local units still have 80% available borrowing capacity, and 63% of cities and municipalities do not have existing debt as of 2019.

“We expect continuous applications of LGUs this year to finance their priority development projects,” Mr. Alvina said.

Sought for comment, Union of Local Authorities of the Philippines (ULAP), and the leagues of provincial, city and municipal treasurers did not respond to queries at the deadline time.

Data from the BLGF showed provincial, city and municipal treasurers collected P205.71 billion via local taxes in the nine months to September last year, exceeding the revised P193.04-billion target for the entire 2020.

For this year, LGUs were tasked to collect P223.9 billion, up by 8.84% from its actual collections as of end September last year.