The Bangko Sentral ng Pilipinas (BSP) has evaluated and processed 182 borrowing requests from local government units (LGUs) in 2022 for total loans worth P36 billion, lower compared to 391 LGU loan requests amounting to P102.9 billion in 2021.
The BSP, as the government’s advisor on official credit operations, is mandated to monitor trends in public sector debt and assess its impact on the monetary sector and external payments position of the economy.
Under Philippine laws, government entities including LGUs are required to seek BSP’s Monetary Board Opinion or MBO on their proposed borrowings. The Monetary Board is a seven-person policy-making body chaired by the BSP governor.
The BSP in the second semester 2022 received 75 requests to assess LGU loans and acted on 72 of the 75. The proposed borrowings amounted to P15.8 billion. This was lower than the 107 requests submitted in the first semester last year worth P20.2 billion.
The requests for MBOs submitted between July to December 2022 came from 56 municipalities with total loans worth P6.9 billion. Meanwhile there are 13 cities proposing P6.4 billion total loans, three provinces with P2.4 billion, and three barangays with P19.6 million.
In the last six months of 2022, the Monetary Board rendered its opinion on 72 LGU proposed loans, of which 63 requests were received in the second semester while nine were carry-overs from the first semester. About 12 requests for review were put on hold due to incomplete submission of information and documentary requirements, said the BSP.
The BSP said that in terms of loan purpose, 64 percent of the loans were intended for infrastructure projects while 21.9 percent and 12.9 percent were LGU borrowings for the acquisition of heavy equipment and procurement of other service vehicles and establishment of online database and business licensing systems. A small 1.1 percent of loans were for Covid-19 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.