LGUs to borrow P8.9-B from banks

President Arroyo authorized yesterday the local government units (LGUs) to borrow a total of P8.9 billion from two state-owned banks to make up for the non-release of the remaining 20 percent of their internal revenue allotments (IRA) as a result of this year’s huge budget deficit.

The authority was granted under a memorandum of agreement (MOA) signed by Secretaries Isidro Camacho of finance, Emilia Boncodin of the budget and Jose Lina Jr. of the interior and local government, and the local chief executives represented by Davao del Norte Gov. Rodolfo del Rosario, president of the League of Governors of the Philippines.

The signing rite, held in Malacañang, was witnessed by the President.

Lina said proceeds of the loans to be secured from the Development Bank of the Philippines and the Land Bank of the Philippines, would serve as bridge financing for the LGUs until next year when the first tranche of their IRA was released under next year’s budget.

Lina said the P8.9-billion LGU loans to be guaranteed by the national government became imperative after the full year budget of P130 billion was breached with five more months left in the current year.

"I call it creative financial arrangement for lack of better words to describe the arrangement, but the bottom line is through the DBP and the LandBank, the national government has made arrangements that the equivalent IRA of the LGUs will be received on the scheduled monthly releases," Lina said. – Marichu Villanueva