MB opinion requests on LGU domestic borrowings up in S1 2021

The Bangko Sentral ng Pilipinas (BSP), in its continued commitment to transparency and good governance, releases summary information on the issuance of Monetary Board (MB) opinions to local government units (LGUs) on their proposed domestic borrowings. This summary provides the amount and intended purpose of the proposed loans by LGUs as well as the dates of the MB opinion issuance.

In the first semester (S1) of 2021, the BSP received 198 LGU requests for MB opinion on their proposed domestic borrowings with total proposed loan amount of P47.2 billion, higher by 23.8 percent than the 160 requests received in S2 2020, which amounted to P42.8 billion. By LGU type, the number of requests received in S1 2021 were disaggregated into 21 provinces (P13.0.billion), 18 cities (P15.0.billion), 157 municipalities (P19.1 billion), and two (2) barangays (P25.5.million).

Meanwhile, a total of 184 MB opinions were issued on proposed LGU loans amounting to P44.8 billion in S1 2021, with details shown in the accompanying table. These MB opinion issuances include those that were rendered for 157 requests received in S1 2021 and those issued for 27 requests received in the previous year. The remaining 41 LGU requests for MB opinion received in S1 2021 will be processed upon submission of the complete set of requirements.

The proposed loans of LGUs were largely intended for infrastructure projects, comprising 67.5 percent of the total proposed loans. These infrastructure projects include the construction and/or improvement of government buildings, public markets, multi-purpose/convention/commercial buildings, farm-to-market and access roads, water system, health care facilities or hospitals, school buildings, sports complex or gymnasium, as well as public transport terminals, among others.

Other proposed loans were intended for the acquisition of heavy equipment and procurement of rescue and/or service vehicles, accounting for 20.5 percent of the total proposed LGU loans.

Meanwhile, 10.0 percent of the total proposed LGU loans were allocated for the acquisition of lots and site development for sanitary landfills, waste management or recovery facilities, as well as loan refinancing.

Finally, the remaining 2.0 percent of the total proposed LGU loans were for the purpose of supporting the country’s response to the COVID-19 pandemic. These include the construction of COVID-19 monitoring/isolation facilities and rehabilitation areas, acquisition of service vehicle for disease surveillance and contact tracing, and procurement of medical equipment, reagents, testing kits, and protective personal equipment (PPE) sets.

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 for the processing of requests for MB opinion, can be accessed on the BSP website.