LGUs Urged To Utilize Increased Budget For Constituents

Finance Secretary Benjamin Diokno urged local government units (LGUs) to optimize their increased budgets from the Mandanas-Garcia ruling in setting up plans on capital investments to address the primary and growing needs of their constituents.

The Mandanas-ruling has expanded the scope of local development projects that LGUs need for effective implementation, Diokno said.

“Local government units are confronted with the challenge of funding the expanded scope of basic services and local development projects. It is therefore imperative that LGUs put in place plans on capital investments,” he added.

Executive Order No. 138, issued by former President Duterte, provides the full devolution of some functions of the executive branch of the government, including the implementation of local infrastructure projects, to LGUs.

EO No. 138 also gave autonomy to LGUs, allowing them, among others, the capability to borrow resources to improve local facilities and services.

However, data revealed that LGUs have a low borrowing rate.

In the past five years, around 62% of LGUs have availed of credit. In 2021, LGU borrowings only amounted to ₱ 136.6 billion or around 0.74% of the country’s gross domestic product (GDP).

The Bureau of Local Government Finance (BLGF), tasked to monitor and evaluate LGU borrowings, noted that LGUs only utilized 51.5% of their borrowing capacity in the past five years. 

Most of the borrowings used were for the construction of local government infrastructures, acquisition of lots, and procurement of heavy equipment.

BLGF encourages local borrowing by issuing the Certificate of Net Debt Service Ceiling and Borrowing Capacity to establish a maximum credit amount that LGUs can refer to.

Diokno added that this initiative between the government and World Bank Group equips LGUs, especially city government stakeholders, with the knowledge and tools to design effective local strategies and implement capital investment projects.

“This initiative will steer our LGUs on the path to creditworthiness, which is key to accessing long-term financing required for sustainable investments,” Diokno said.

Source: Manila Bulletin