LGU debt applications down 72 percent

The Office of Local Government Finance (BLGF) said that requests for repayment on debt by local government units fell 72.53 percent to 21.04 billion pesos in the eight months to August.

BLGF data obtained by the Manila Times on Tuesday showed that borrowing requests from LGUs totaled 49.44 billion pesos, 75.13 percent lower than a year earlier.

The borrowing capacity of cities was 26.15 billion pesos, followed by municipalities at 17.2 billion pesos, provinces at 6.05 billion pesos, and Barangay (villages) at 37.24 million pesos.

The BLGF issued three LGUs certificates in August, including one amendment covering proposed loans worth 235 million pesos versus 4.02 billion pesos from the previous year.

The BLGF’s issuance of 116 certificates with a net debt service ceiling and borrowing capacity of LGUs, which included seven reviews, compared to 294 certificates issued in the previous year, serves as a proxy indicator for the indebtedness of LGUs.

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The agency noted that six Barangayi, four provinces, 23 cities and 83 municipalities have obtained these certificates. Three certificates were also issued to LGUs in August, including one amendment, covering proposed loans worth 235 million pesos, compared to 4.02 billion pounds from the previous year.

The municipality of Benjar in La Union in August benefited from loans of 200 million pesos.

Barangay Turod’s order in Sudipen, La Union is subject to modification.

Michael Rycafort, chief economist at Rizal Commercial Banking Corp., explained that LGUs have mainly reduced borrowing requirements due to the Mandanas ruling.

“This may also have something to do with the need to reduce government expenditures through more disciplined spending after the massive debt of 5 trillion pesos incurred since the pandemic,” Rycafort told the Manila Times in a Viber message.

Early this year, the government began implementing the Mandanas-Garcia High Court ruling, with the Budget and Administration Department serving as the head of the Power Transfer Commission.

Under the resolution, LGUs are entitled to 40 percent of all national taxes, including those not collected by the Office of Internal Revenue.

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