Local government units (LGUs) sharply reduced their reliance on credit markets last year, with total financing requests plunging by more than 60 percent as borrowing activity shifted away from the nation’s economic heartland toward provincial infrastructure projects.

According to the Bureau of Local Government Finance (BLGF), the number of LGUs seeking certificates of net debt service ceiling and borrowing capacity (CNDSCBCs)—a regulatory prerequisite for securing loans—fell to 185 in fiscal year 2025, a 48.8 percent decline from the 362 units recorded in 2024.

This contraction in participation led to a 62.2 percent decline in total loan requirements, which ended at ₱44.7 billion for the year, down from ₱118.2 billion in the previous period.

LGUs are required to submit CNDSCBCs to government financial institutions (GFIs) and private banks to demonstrate their capacity to repay loans.

Ma. Teresa S. Habitan, vice chancellor of the Philippine Tax Academy, meanwhile, explained that borrowing volumes typically decline during election cycles due to legal restrictions on new projects.

“If you look at the longer time series, borrowings always fall during election years and 2025 was an election year,” Habitan said.

She attributed the decline to the ban on mandatory elections, noting that a similar contraction occurred during the 2022 polls.

While LGUs’ total legal borrowing capacity significantly declined to ₱115.2 billion in 2025 from ₱255.4 billion, their combined borrowing capacity was nearly three times their loan requirement, implying the ability to settle obligations.

DOF-BLGF data showed a shift from urbanized regions to more provincial areas, with CARAGA and Western Visayas taking the lead at ₱6.7 billion and ₱6.1 billion, respectively.

Notably, Metro Manila’s loan requirements plummeted to ₱1.9 billion in 2025 from ₱13.4 billion in the previous year.

Similarly, Region 4A (CALABARZON) was the leading region in 2024 in seeking financing, but it sought only ₱1.6 billion in loans in 2025, a 91 percent year-on-year decline. CALABARZON comprises Cavite, Laguna, Batangas, Rizal, and Quezon.

LGUs rushed to secure financing in December, as the year-end tally indicated ₱10.9 billion in 2024 loan requirements. In contrast, December 2025 saw muted borrowing activity at ₱4.7 billion, less than half year-on-year.

Interestingly, although overall borrowing declined, barangays experienced increased participation, with issued certificates rising to 7 in 2025 from 3 in 2024. Certificates issued to other LGU types all posted declines, with municipalities dropping by more than half to 141 from 290; cities falling 55.3 percent to 21 from 47; and provinces declining by nearly a quarter to 16 from 21.

Infrastructure and logistics remained the core priorities for LGU spending. Several LGUs submitted substantial funding requests, with the largest projects focused on logistics hubs, health infrastructure, and large-scale urban modernization.

Notably, the largest project in 2025 was the construction of Phase 1 of the Butuan Logistical Seaport, valued at ₱6.1 billion.

Another large funding request came from Davao del Norte, which sought ₱2.5 billion to finance several projects, including a Green Hospital building, Phases 2 and 3 of the Davao del Norte Multi-Purpose Coliseum, and a provincial convention center with a dormitory.