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LGU requests for MB opinion on loans rise 72%

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MORE local government units (LGUs) have sought the opinion of the Monetary Board (MB) for their domestic borrowings in the second half of 2020, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

The BSP said it has processed 160 LGU requests for MB opinion with a total proposed loan of P42.8 billion. The number of requests in the second half of 2020 was higher by 72 percent than the 93 requests processed in the first half of the year 2020.

The prior opinion of the MB on the proposed borrowings of government entities, including LGUs, is mandated by law under the New Central Bank Act. This requires the government, its political subdivisions or instrumentalities, to request the MB 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.

The BSP said the requests for MB opinion processed in July to December last year came from 17 provinces with a total proposed loan of P18.9 billion; 21 cities with a total proposed loan of P9.2 billion; 120 municipalities with a total proposed loan of P14.6 billion; and 2 barangays with a total proposed loan of P4.2 billion.

Two of the biggest loans that sought an MB Opinion are from Cavite—one on a P2.5-billion loan to build a government complex and one on a P2.14-billion loan to finance Cavite’s Wi-fi project.

Other notable loans include a P2-billion borrowing plan from Nueva Ecija to finance its Palay Price Support Program, the construction of a commercial complex and a rice mill facility and a P1.7-billion loan from Marikina to refinance its outstanding principal balance from the Philippine National Bank and fund the construction of a 5-story market building.

Of the total number of LGU requests, 140 requests or 87.5 percent were rendered an MB opinion, with a total loan amount of P38.2 billion. The processing of the remaining 20 requests was deferred due to incomplete documents or information submitted.

Among the 17 Philippine regions, the largest number of LGU requests that were rendered an MB opinion came from Central Luzon at 10.7 percent, with loan purposes that are mostly intended for infrastructure projects and acquisition of heavy equipment.

The BSP also said some proposed loans were intended to fund measures to address the Covid-19 pandemic, such as for the acquisition of health service vehicles, construction of isolation/quarantine facilities, procurement of personal protective equipment (PPE), hospital equipment, medicines, reagents and testing kits, as well as provision of food assistance and relief goods.

Read full article on BusinessMirror

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