LGU requests for MB opinions decline in S2 2022 relative to previous semester

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

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

In the second semester (S2) of 2022, the BSP received a total of 75 requests for MBOs on LGUs’ proposed domestic borrowings amounting to P15.8 billion.

The total number of LGU requests and total amount were lower by 29.9 percent and 22.0 percent, respectively, compared with the 107 requests received amounting to P20.2 billion in S1 2022.

The requests for MBOs came from 56 municipalities (P6.9 billion), 13 cities (P6.4 billion), three (3) provinces (P2.4 billion) and three (3) barangays (P19.6 million).

During the semester in review, the MB rendered its opinions on 72 LGU proposed borrowings totaling P15.8 billion.

The MB issuances were for 63 requests received in S2 2022 and nine (9) requests received in S1 2022. The other 12 requests received in the semester under review were put on hold due to incomplete submission of information and/or documentary requirements.

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, flood control systems.

Other infrastructure projects include the construction of public transport terminals, government administrative buildings, public plaza/ parks/ gymnasium/ covered courts/ coliseum, slaughterhouses, evacuation/rehabilitation centers, housing and resettlement areas, motor pool building/parking spaces, as well as public cemetery, among others.

Meanwhile, some LGU borrowings were intended for the acquisition of heavy equipment and procurement of service vehicles (comprising 21.9 percent).

Also, there were loans intended for other purposes (12.9 percent), such as the acquisition of lots and/or site development for the eventual construction of various buildings/facilities as well as the establishment of online database and business licensing systems. Finally, there continues to be some loans that were intended to fund response measures to the COVID-19 pandemic (1.1 percent of total LGU loans).

Two LGUs requested for MBOs on their proposed loans with a total amount of P671.4 million that were allotted for the acquisition of medical equipment related to COVID-19 and construction of a pandemic-response building.

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, the government, including its political subdivisions or instrumentalities, is required to request an MB opinion/s 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. 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. https://www.bsp.gov.ph/Pages/Regulations/GuidelinesOnTheEstablishmentOfBanks/RequestForMonetaryBoardOpinionOnDomesticGovernmentBorrowings.aspx.