By Lee C. Chipongian, January 29, 2020; Manila Bulletin
Finance Secretary Carlos G. Dominguez III is encouraging local government units (LGUs) to tap the loan facilities of state banks and financing units after they have streamlined and made it easier for LGUs to avail of these funds, particularly for infra-related and development projects.
The Department of Finance (DOF) chief has presented the guidelines of several credit facilities offered by Land Bank fo the Philippines, Development Bank of the Philippines and the Municipal Development Fund Office (MDFO) of the DOF to the League of Provinces of the Philippines (LPP).
“The DOF stands ready to assist our LGUs in efficiently and effectively implementing their priority development projects that are crucial to the fulfillment of President Rodrigo Duterte’s primary goal of providing a safe, decent, and comfortable life for every law-abiding Filipino,” Dominguez said in a letter to LPP national chairman, Governor Dakila Carlo Cua of Quirino.
The DOF said LGUs have access of up to 100 percent project cost financing for their infrastructure and development projects.
Dominguez, Landbank chairman, offered the state bank’s Omnibus Term Loan Facility (OTLF) which allows qualified LGUs to fund infrastructure and socio-economic projects that are listed in their approved Local Development Plan and Public Investment Program. In 2019, the Manila city government has availed of this loan in the amount of P10 billion for the renovation and upgrade of its health, education and tourism infrastructure.
Dominguez said the OTLF eliminates the inconvenience and associated transaction cost in securing loan approval for every single project to be implemented.
LandBank applies a prescribed formula in computing the net debt service ceiling and borrowing capacity of the LGUs, he added.
Dominguez said the DBP, on the other hand, can provide loans to finance priority projects of LGUs up to 100 percent of the total project cost based on the Estimated Calculated Cost Ranges (ECCR) or the winning bid price, but not to exceed the barangay’s net debt service ceiling and borrowing capacity as certified by the DOF’s Bureau of Local Government Finance (BLGF).
“The usual basis of the BLGF is that the amortizations must not exceed 20 percent of the Internal Revenue Allotment (IRA) share of the concerned LGU,” said Dominguez.
DBP has financed various LGU projects such as school buildings, market places, administration offices, multipurpose halls, sports complexes, hospitals, the acquisition of heavy equipment and information technology equipment, and other projects directed to provide better services to the people.
The MDFO, which is an agency of the DOF, have concessional financing and technical assistance to LGUs, provided that their loans should be within their borrowing capacity as certified by the BLGF, said Dominguez. “The LGUs, for instance, may avail of the Disaster Management Assistance Fund (DMAF) for their disaster prevention and mitigation initiatives.” Other financing windows of the MDFO are available for funding of local projects related to public economic enterprise or those that are revenue generating, he said.