$150-M facility for LGU reform OK’d

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has approved a foreign loan meant to make the services of local government units (LGUs) better and more efficient.

BSP Governor Amando M. Tetangco said the Monetary Board approved in principle a $150-million loan from the Agence Francaise de Developpement for the Local Government Finance and Fiscal Decentralization Reform SubProgram 1.

“This is a policy-based program... (that) aims to promote inclusive growth and reinforce poverty reduction through improved service delivery by the local government units,” Tetangco said.

“(This will be done) through the creation of a conducive fiscal framework, the development of adequate and equitable resource framework, strengthening of public financial management, and the reinforcement of good local governance, transparency, and accountability,” he added.

The borrowing has a maturity of approximately 20 years, inclusive of a seven-year grace period.

Tetangco said the project is co-financed by the Asian Development Bank (ADB), which earlier this year set aside $500 million for the program.

The BSP chief said the project will be implemented by the departments of finance, interior and local government, and budget and management.

The project is aimed at improving the local government’s delivery of services by making local governance and financial management systems more efficient and transparent.

In July, the ADB noted that improving local government units’ services is a critical key in achieving inclusive growth and reducing poverty.

The multilateral development institution also said finetuning the local government’s financial systems should be followed by improvements in the regulatory framework for intergovernmental fiscal relations.

The ADB earlier said it will issue two tentative tranches of $250 million each this year and in 2015 for the fiscal reform project.

At the same time, it said it may provide a $1-million technical assistance grant for the same program.