DOF: Local Governments Increase Infrastructure Borrowing

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Like the national government, local governments have accelerated infrastructure development, thus borrowing more to build local public works and health facilities during the protracted COVID-19 pandemic.

“Based on our data, financing infrastructure projects is the most common loan purpose in the certificates we issued in fiscal years 2020 to 2022,” Niño Raymond Alvina, Executive Director of the Office of Finance of Local Government (DOF-BLGF) of the Ministry of Finance. , told the Inquirer last week.

Alvina was referring to Net Debt Service and Borrowing Capacity Ceiling Certificates (CNDSCBC), which BLGF issues to local governments, who in turn submit them to public financial institutions (GFIs) to show that they can repay their obligations.

Alvina said 205 of the 271 CNDSCBC issued by the BLGF in 2020, or 76% of the total, were for local government borrowing to fund infrastructure projects.

In 2021, 74% or 276 of the 372 certificates had the same objective. In March this year, 58 of the 73 CNDSCBC issued, or 79%, were sought for infrastructure-related loans, Alvina said.

President Duterte’s economic managers wanted to maintain massive investments in infrastructure nationwide to generate more jobs and support the recovery from the pandemic-induced economic crisis.

“Strengthen recovery programs”

The government had planned to spend a record 1.27 trillion pesos, or 5.9 percent of gross domestic product, on infrastructure this year.

No less than Finance Secretary Carlos Dominguez III had urged local governments to “make the best use of their borrowing capacity to strengthen recovery programs” from the health and socio-economic crises inflicted by COVID-19.

Given local governments’ larger share of the national budget with the implementation of the Supreme Court’s Mandanas-Garcia ruling in full swing from this year onwards, more functions have been delegated or transferred to them, including including local infrastructure projects.

The National Authority for Economics and Development Council, chaired by Mr. Duterte, last month ordered national government agencies to no longer endorse, approve or fund programs covered by local government functions under the Local authorities code. The 2022 national budget of 5.02 trillion pesos had set aside the national tax allocation for local governments amounting to 959.04 billion pesos – a jump from their former allocation of internal revenues worth of 695.49 billion pesos last year.

During the first quarter, 73 local governments borrowed a total of 12.8 billion pesos to fund infrastructure spending and other local projects. INQ

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