LGU requests for MB Opinion were higher in S2 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 second semester (S2) of 2023, the BSP received a total of 159 requests for MBOs on LGUs’ proposed domestic borrowings amounting to P48.9 billion. The total number of LGU requests and total amount were higher by 15.2 percent and 13.5 percent, respectively, compared with the 138 requests received amounting to P43.1 billion in S1 2023. The requests for MBOs came from 123 municipalities (P15.9 billion), 20 cities (P22.6 billion), 11 provinces (P10.3 billion) and five (5) barangays (P109.3 million) which were located mostly in Regions III (Central Luzon), IV-A (CALABARZON), V (Bicol), VI (Western Visayas), VII (Central Visayas), and XII (SOCCSKSARGEN).

During the semester in review, the MB rendered its opinion on 143 LGU proposed borrowings totaling P45.0 billion. The said MB issuances were for 125 requests received in S2 2023 and 18 requests received in S1 2023. The remaining 34 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 (61.4 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 (comprising 19.5 percent) were intended for the acquisition of lots and/or site development for the eventual construction of various buildings/facilities as well as permanent working capital for the acquisition of Palay from small farmers, and acquisition and installation of various e-governance systems, among others. Other purposes (19.0 percent) indicated in the proposed loans were the acquisition of heavy equipment and procurement of service vehicles.

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.

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