League of Provinces moves to exclude Municipal Development Fund from being used in pandemic response

Published August 14, 2020, 11:49 PM

by Chito Chavez

The League of Provinces of the Philippines (LPP) on Friday said it fully supports the initiative of Congress to expedite the passage of both Senate Bill No. 1564 and House Bill 6953 for the enactment of the Bayanihan to Recover as One Act.

LPP president and Marinduque Gov. Presbitero J. Velasco Jr. said the league has thrown its full support for the proposed measure “so we can jumpstart and revive our economy that has been badly ravaged by the COVID-19 pandemic.”

However, Velasco said the league has urged Congress “to specifically exclude the Municipal Development Fund (MDF) from the classification of special funds to be used for the various response and recovery interventions from the pandemic.”

Velasco is referring to paragraph (pp) of Sec. 3 in both Senate Bill No. 1564 and House Bill 6953, which states: “Any unutilized or unreleased balance in a special purpose fund declaring a public health crisis of national concern shall be considered to have their purpose abandoned for the duration of the health crisis”.

The 81-strong LPP approved a resolution urging Congress to exclude the MDF from those classified as special funds that will be forfeited for COVID-19 purposes.  

Under Bayanihan 1, some P1.4 billion was already forfeited early this year from the MDF Office and transferred to fund COVID-19.

“We wish to point out here that the MDF was created under P.D. No. 1914 as a special revolving fund for foreign assisted projects intended for local government units.  Executive Order No. 41, S. of 1998, reiterated that this is a self-perpetuating revolving fund which serves as a loan facility for LGUs, and which is to be amortized by the latter using their general funds,” Velasco said.

In a position paper, Bohol Gov. Arthur C. Yap on behalf of the LPP emphasized that the MDF was established for “the noble purpose of promoting self-reliance of LGUs for their economic development programs’’.  

Yap stressed that “the MDF is not part of the general appropriations act (GAA) nor is it funded by financial contributions from any Government Financial Institution (GFI).  

He noted that it is financed from proceeds of foreign loans, assistance or grants for LGUs, but also from amortizations from the interest and principal payments made by the LGUs.  

“It is intended to be available solely to LGUs for specific purposes, project components and activities set forth in international agreements between the government of the Philippines and international institutions such as IBRD, ADB, USAID, among others,” Yap explained. 

He added that to forfeit such funds will result in the impairment of existing loan contracts.   

Yap said that under Section 10, Article III of the 1987 Constitution, “[n]o law impairing the obligation of contracts shall be passed.”

Aside from the foreign grants and assistance, Yap explained the MDF partly consisted also of the principal and interest payments of LGUs which have already availed of the facility. 

On the contrary, no GFI has contributed a single centavo to the fund, making this self-perpetuating.

Stressing its position on the provision of the Bayanihan 2 bill, which is currently under consideration by the Bicameral Conference Committee of the Senate and House of Representatives,  Velasco said the LPP is “seeking for the insertion of a clause in Sec. 3, paragraph (pp), which will state that this provision will not apply to (1) special funds or shares allocated or automatically released to LGUs;  (2) the MDF as revolving trust funds intended solely for the use of LGUs and for a specific purpose; and (3) funds for LGUs not included in the GAA”.

“The MDF provides as low as 0 percent interest loans for interested and qualified LGUs that may apply for funding of key infrastructure projects such as Hospitals, Digital Infrastructure in support of Education, water supply systems such as Hospitals, Digital Infrastructure in support of Education, water supply systems, or for revenue generation, social services, and arresting environmental degradation as part of its efforts to combat and recover from COVID-19,’’ the LPP statement read.

The LPP noted that 93 LGUs, among them five provinces, currently have 137 ongoing sub-projects funded under the MDF.

“The provinces of Bohol, Camarines Norte, Negros Occidental, Palawan and Zamboanga del Norte have loans with the MDF, of which a portion of these, amounting to more than a billion pesos, is still unreleased,’’ the LPP added.

“We all know that winning the battle against COVID-19 goes far beyond health interventions. The LGUs need these types of low-interest loan facilities for COVID-19 as well as other priority programs.  We should focus our recovery and rehabilitation efforts toward establishing a better normal that considers all aspects of human development while ensuring that we keep track of our Sustainable Development Goals, which is key to a holistic, whole of government, the whole of society approach,” Velasco concluded.