BSP reviewed P25.8-B LGU loan requests

Published December 6, 2022, 3:39 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) said it has processed 120 domestic borrowing proposals from local government units (LGU) worth P25.8 billion in the first six months of 2022.

The 120 LGU requests for Monetary Board opinion included carry overs from the second semester 2021.

For the first semester, the BSP received 107 LGU borrowing proposals amounting to P20.2 billion. Not all were reviewed or given a Monetary Board opinion. The 107 requests was lower compared to 193 requests for Monetary Board opinion totalling P55.7 billion in the second semester of 2021.

BSP building and logo/Reuters

The Monetary Board issuances in the tally of P25.8 billion included the reviewed 98 requests received this year and the 22 requests from the second half of 2021.

The seven-member Monetary Board is the BSP’s policy-making arm. Under the law, government entities including LGUs are required to seek Monetary Board opinion on their proposed borrowings. The BSP is also the government’s advisor on official credit operations.

In the first semester this year, the 107 requests for Monetary Board opinion came from six provinces which asked to review its planned P2.4 billion loans. The BSP also received requests from 12 cities with combined proposed borrowings of P8.7 billion, 84 municipalities with P9.1 billion, and five barangays with P41.1.million.

The BSP said 66 percent of the P25.8 billion LGU loans reviewed and processed by the Monetary Board were for infrastructure projects such as the construction and improvement of public markets, farm-to-market/access roads and bridges, multi-purpose buildings/ business/ commercial centers, water system and septage treatment, government administrative buildings, health care facilities or hospitals, school buildings, public plaza/parks/ gymnasium/covered courts, and public transport terminals, among others.

About 23.6 percent of LGU loans were for the acquisition of heavy equipment and procurement of rescue and/or service vehicles.

Another 9.7 percent of the total were allocated for the acquisition of lots and site development; 0.3 percent for loan take out or refinancing; and 0.3 percent for the construction of isolation facilities in support of the country’s COVID-19 pandemic response.

Section 123 of Republic Act No. 7653 or the New Central Bank Act of 1993, as amended by RA 11211 in 2019, requires the government, its political subdivisions or instrumentalities, to request the Monetary Board 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,” said the BSP.