DOF-BLGF certifies Yolanda LGUs’ capacity for P1.8B own-loan financing bids
DOF simplifies debt ceiling certification requirements for Yolanda-affected LGUs
The Department of Finance-Bureau of Local Government Finance has approved the certification of borrowing capacity for the P1.8 billion loan applications of local government units (LGUs) affected by Typhoon Yolanda from January to May 2014.
Of the 13 applications from Yolanda LGUs received by the DOF’s Bureau of Local Government Finance (BLGF) during the first quarter of 2014, 11 have already been approved and issued by BLGF.
The move is to ensure that other options for financing and fund mobilization, such as domestic borrowing, are immediately available for post-Yolanda recovery and rehabilitation programs, in addition to projects already being implemented by the National Government, as well as to fund previously proposed capital investment projects.
The BLGF certifies an LGU’s debt servicing ceiling (DSC) and net borrowing capacity (NBC) as a requirement of the Monetary Board of the Bangko Sentral ng Pilipinas in granting prior opinion on proposed LGU borrowings, as mandated under Sec. 123 of the New Central Bank Act of 1993.
The Province of Palawan is set to receive already the P1.2 billion loan from the DOF’s Municipal Development Fund Office (MDFO) through its Disaster Management Assistance Facility, the biggest thus far certified by BLGF in 2014, to finance the procurement of heavy construction equipment for the repair and rehabilitation of public infrastructures and areas devastated by Typhoon Yolanda.
Among those issued already with DSC and NBC certificates, but are still pending for final approval by the Monetary Board and the concerned government banks, are the loan applications with the Development Bank of the Philippines (DBP) of the provinces of Southern Leyte for P250 million for the construction and improvement of farm-to-market roads and hospital building, and Negros Occidental for the P157.5 million construction of cyber center building.
Also approved were the applications with the Land Bank of the Philippines (LBP) of the municipalities of Lambunao, Iloilo (P21 million loan for farm-to-market road and heavy equipment); Pilar, Capiz (P20 million loan for construction of public market); and Banate, Iloilo (P16 million for the procurement of heavy equipment).
Other applications with LBP that have been certified by the BLGF are from the municipality of Makato, Aklan (P4 million for the construction of multi-purpose building) and Passi City (P33 million for the improvement of city hall).
The certification for Municipality of Banga, Aklan for a P50 million loan with Philippine Veterans Bank for the procurement of heavy equipment, and for the proposed P47 million loan of the municipality of Salcedo, Eastern Samar with the MDFO were likewise approved by BLGF.
After an LGU loan application is certified as to the NBC and DSC, the proponent LGU then requests for the prior opinion and approval of the Monetary Board before the amount is finally approved and released by the authorized lending institution.
Recently, the Province of Aklan has received already P2.1 million out of the approved Php200 million loan with the LBP for the repair of various government buildings.
The NBC is the maximum loanable amount for a given period of time and interest rate given an LGU’s annual 20 percent DSC, which is the limitation set under Sec. 324(b) of the Local Government Code on how much can be appropriated for debt service from an LGU’s annual regular income.
Other Yolanda LGUs would benefit from faster processing as Finance Secretary Cesar Purisima already instructed to reduce the documentary requirements and hasten the review and approval by BLGF.
Reports have reached the DOF that Yolanda LGUs have difficulty complying with the original 12 documents required under LFC No. 1-2012 issued in 2012, as the documents have been damaged already and may be difficult to source from other government agencies also affected in their localities.
Under the new Local Finance Circular (LFC) No. 01-2014, only the following four documents will be required for evaluation by BLGF:
1. Letter-request from the Local Chief Executive (Governor/Mayor) indicating: (i) the selected lending institution; (ii) terms and condition of the proposed loan (repayment period and interest rate); and, (iii) the specific purpose of the loan;
2. Certification on absence or existence of approved loans per LFC No. 1-2012;
3. Authenticated copy of the Resolution/Ordinance authorizing the local chief executive to negotiate and contract a loan in behalf of the LGU; and
4. Certification from the lending institution that it shall not be requiring LGU deposits as compensating balance for the loan, if such lending institution is (i) not an authorized government depository bank, or (ii) an authorized government depository bank required to obtain the prior approval of the DOF per Department Order No. 27-05.
The circular, however, covers only applications from LGUs affected by Typhoon Yolanda, as certified by the National Disaster Risk Reduction and Management Council.
The revised rules would only be effective for one year, but the certification that will be issued by the BLGF for Yolanda LGUs will be valid up to two years from the date of issuance to allow time for LGUs to consider priority projects and best financing terms.
Other LGUs intending to secure certification from the BLGF are still required to comply with the full documentary requirements under LFC No. 1-2012.
The circular further instructs the concerned local treasurers to report the details of the financing facility within 10 days from approval of applications to the BLGF for monitoring purposes.