Quezon City – The Bureau of Local Government Finance (BLGF) partnered with the World Bank’s Local Creditworthiness Academy, in capacitating the chief financial officers, treasurers, revenue directors, and planners from 15 selected local government units (LGUs) on the underlying principles of creditworthiness, on 22 to 25 November 2022 at the Novotel Araneta, Quezon City.
In a keynote message, Finance Secretary Benjamin E. Diokno emphasized the importance of borrowing for local governments to efficiently respond to the evolving needs of their constituents, especially now that there are certain functions fully devolved from the executive branch to the local governments pursuant to the Executive Order (EO) No. 138, series of 2021.
“Local government units are confronted with the challenge of funding the expanded scope of basic services and local development projects; therefore, it is imperative that LGUs put in place plans on capital investments and be prepared to engage in alternative modalities to improve and expand facilities and services such as in transportation and urban development”, Secretary Diokno said.
Diokno added that LGUs have a low appetite for borrowing, with only around 62 percent of LGUs have availed of credit in the past five (5) years. For the said period, only 51.5 percent of LGUs utilized their borrowing capacity which covers projects for construction of local government buildings and roads, procurement of heavy equipment, and acquisition of lots. For fiscal year (FY) 2021 alone, LGU borrowings amount to an outstanding balance of 136.6 billion Pesos – or 0.74 percent of the country’s gross domestic product (GDP).
Diokno further said that the engagement with the World Bank Group will provide local governments with the right tools and knowledge to design creditworthy strategies in planning and implementing capital investment projects.
“This initiative will assist national and local stakeholders to steer city governments on the path towards creditworthiness – the foundation for accessing the long-term financing solutions required for sustainable investment”, Diokno added.
The recent developments and bindings on LGU financing and investments, core financial management issues among local governments, approaches to raising capital for local government projects, sound financial management and assessing creditworthiness, and emerging key issues, with LGUs’ presentation of action plans and technical assistance were discussed in the Academy.
The Local Debt Monitoring and Evaluation Division (LDMED) of the BLGF monitors, evaluates, and issues the Certificate of Net Debt Service Ceiling and Borrowing Capacity that sets the maximum amount an LGU can borrow.
The 15 selected LGUs are the cities of Bacolod, Baguio, Batangas, Cagayan de Oro, Cebu, Digos, General Santos, Iloilo, Lapu-Lapu, Mandaluyong, Manila, Muntinlupa, Pasig, Quezon, and Surigao. Resource speakers who shared expertise on local creditworthiness are the following: