LGU Requests for MB opinion were lower in S2 2021

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

This set of information details the amount and intended purpose of the proposed loans by LGUs.

In the second semester (S2) of 2021, the BSP received a total of 193 requests for MBO on LGUs’ proposed domestic borrowings. This was 2.5 percent lower than the 198 requests received in S1 2021.

However, in terms of the total loan amount, the S2 2021 LGU loans amounted to P55.7 billion, an 18 percent increase from the P47.2 billion total LGU loans in the previous semester. By type of LGU, the requests for MBO were comprised of nine (9) provinces (P6.6 billion), 33 cities (P31.9 billion), 149 municipalities (P17.2 billion), and two (2) barangays (P18.5 million).

During the semester in review, the MB rendered its opinion on 206 LGU proposed borrowings totaling P56.4 billion. The said MB issuances were for 169 requests received in S2 2021 and 37 requests received in S1 2021.

Of the total proposed LGU loans issued with MBO, 70 percent were intended for infrastructure projects involving mostly the construction of multi-purpose buildings/business/commercial centers, public markets, water systems, farm-to-market roads and bridges, government buildings, health care facilities or hospitals and school buildings, among others.

There were also proposed loans for the acquisition of heavy equipment and procurement of rescue and/or service vehicles which accounted for 20.5 percent of the total LGU loans.

Other proposed LGU loans, comprising 8.3 percent of the total, were allocated for the acquisition of lots and site development, while 0.5 percent was intended for loan take out or refinancing.

Finally, in support of the country’s COVID-19 pandemic response, 0.7 percent of the total proposed LGU loans were allocated for the construction of isolation facilities.

The prior opinion of the MB on the proposed borrowings of government entities, including LGUs, is mandated by law under 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.

The said provision requires the government, its political subdivisions or instrumentalities, to request the MB to render its opinion on the monetary and external sector implications of their proposed loans 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. It enables the BSP to monitor trends in public sector debt and assess its 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.