MANILA, Philippines - The Monetary Board (MB) has approved the government’s $225-million program loan from the Asian Development Bank (ADB), Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said.
Tetangco said proceeds of the loan would fund a project that will help cities and municipalities become more financially independent of the National Government.
He pointed out that the program loan would finance the Local Government Financing and Budget Reform Program aimed at improving the revenue generation and budget processes of local government units (LGUs).
The project to be financed by the loan would redound to improved public service delivery by cities and municipalities.
The BSP chief said the loan would be payable in 15 years, including a grace period of three years. It will carry an interest equivalent to the London interbank offered rate (Libor) plus 20 basis points.
The LGU program was needed given that many cities and municipalities were still heavily dependent on the National Government for financing.
Under the Local Government Code, 40 percent of the taxes collected by the National Government will be distributed among local governments. The Department of Finance (DOF) said many cities and municipalities almost solely rely on the revenues from the National Government for their operations.
Fiscal authorities have been urging LGUs to issue their own bonds and forge tie-ups with the privates sector for the implementation of infrastructure and other vital projects.