The Bangko Sentral ng Pilipinas (BSP) has processed 198 requests from local government units (LGU) seeking Monetary Board opinion before they could proceed to borrow money for various projects, mostly for infrastructure development.
These requests which were all domestic borrowings for the first six months of this year, amounted to P47.2 billion.
The requests for Monetary Board opinion in the first semester was higher than the previous semester’s (July-December 2020) 160 requests for LGU loans amounting to P42.8 billion.
In a statement, the BSP said of the 198 requests, the Monetary Board issued its opinion only on 184 proposed LGU loans to borrow P44.8 billion during the period. The remaining 14 LGU requests have incomplete requirements and will be processed once all data is submitted to the BSP.
By LGU type, 21 provinces requested to borrow P13 billion in the first semester, while 18 cities saught Monetary Board opinion to borrow P15 billion. About 157 municipalities were proprosing to borrow P19.1 billion and only two barangays filed a request to P25.5 million.
The BSP said 67.5 percent of proposed LGU loans were for infrastructure projects such as: 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; and public transport terminals.
About 20.5 percent of LGU loans were for the acquisition of heavy equipment and procurement of rescue and/or service vehicles, while 10 percent were alloted for lots and site development for sanitary landfills, waste management or recovery facilities, as well as loan refinancing.
Only two percent of the total proposed LGU loans were intended for COVID-19 response, said the BSP. These include: construction of 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 sets.
Under the BSP Charter, the proposed borrowings of government entities including LGUs, will have to be reviewed by the Monetary Board and to give its opinion on these proposed loans. “This provision of the law stems from the BSP’s role as the government’s advisor on official credit operations (and) 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,” said the BSP.
The Monetary Board normally takes about three weeks to release an opinion on any proposed domestic borrowings. This is after all requirements and documents have been submitted to the Monetary Board for review.
The central bank regularly reminds banks and non-bank financial institutions to seek Monetary Board opinion first before granting loans to LGUs to get the “probable effects” of their loans and other borrowings on prices, monetary aggregates and the country’s balance of payments.