LGU requests for MB Opinion were higher in S1 2023 relative to previous semester

The Bangko Sentral ng Pilipinas (BSP), in its continued commitment to transparency and good governance, releases information on the issuance of Monetary Board opinions (MBOs) on the proposed domestic borrowings of local government units (LGUs).

This information includes the amounts and intended purpose of the proposed loans of LGUs.

In the first semester (S1) of 2023, the BSP received a total of 138 requests for MBOs on LGUs’ proposed domestic borrowings amounting to P43.1 billion.

The total number of LGU requests and total amount were higher by 84.0 percent and 172.9 percent, respectively, compared with the 75 requests received amounting to P15.8 billion in S2 2022.

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 requests for MBOs came from 109 municipalities (P16.1 billion), 21 cities (P24.1 billion), four (4) provinces (P2.9 billion) and 4 barangays (P21.5 million) which were located mostly in Regions III (Central Luzon), IV-A (CALABARZON) and VI (Western Visayas).

During the semester in review, the MB rendered its opinion on 126 LGU proposed borrowings totaling P41.0 billion.

The said MB issuances were for 115 requests received in S1 2023 and 11 requests received in S2 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.

In terms of loan purpose, the majority of loans were intended for infrastructure projects (64.0 percent), such as the construction and/or improvement of farm-to-market/access roads and bridges, public markets, multi-purpose buildings/ business/ commercial centers, health care facilities or hospitals, school buildings, solid waste management/materials recovery facilities, water system and septage treatment, and drainage and sewerage systems.

Meanwhile, some LGU borrowings were intended for the acquisition of heavy equipment and procurement of service vehicles (comprising 20.5 percent).

Other proposed LGU loans, comprising 15.3 percent of the total, were allocated for the acquisition of lots and/or site development for the eventual construction of various buildings/facilities as well as the installation of various e-governance systems; and 0.2 percent was intended for loan take out or refinancing.

The issuance of MB opinions on domestic borrowings is pursuant to Section 123 of Republic Act (R.A.) No. 7653, otherwise known as the New Central Bank Act of 1993, as amended by R.A. No. 11211, which states that the government, including its political subdivisions or instrumentalities, is required to request an MB opinion on the monetary and external sector implications of their proposed loan/s prior to undertaking any credit operation.

This provision of the law stems from the BSP’s role as the government’s advisor on official credit operations. 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.

Further information on this matter, particularly the BSP guidelines in the processing of requests for MBO, can be accessed on the BSP website. https://www.bsp.gov.ph/Pages/Regulations/GuidelinesOnTheEstablishmentOfBanks/RequestForMonetaryBoardOpinionOnDomesticGovernmentBorrowings.aspx).