Gov’t gives 2% interest subsidy on LGU loans under Bayanihan 2 —Landbank

State-run Land Bank of the Philippines said Tuesday the national government is providing an interest rate subsidy of 2% per annum on new and existing loans of local government units (LGUs) to fund their response and recovery initiatives.

In a statement, Landbank said the interest subsidy forms part of the provisions of Republic Act No. 11494 or the Bayanihan to Recover as One (BARO) Act or Bayanihan 2, in which the state lender has been allotted a P1-billion interest subsidy fund by the national government for loans secured by LGUs.

The relief shall be applied to loan interest payments of municipal, city and provincial LGUs until December 31, 2022, or until the interest subsidy fund is fully utilized, the Landbank said.

The bank added that a maximum interest subsidy equivalent to P10 million has been set for cities and provinces, and P5 million for municipalities “to extend the interest rate subsidy to as many LGUs as possible.”

“We strongly encourage our LGUs to make full use of credit facilities subsidized by the national government to bankroll development projects in their respective localities. This will contribute greatly to reviving local economies and helping the country recover from the impact of the COVID-19 pandemic,” said Landbank president and CEO Cecilia Borromeo. 

Qualified LGUs may avail of the loan interest subsidy for eligible projects pursuant to the objectives of the Bayanihan 2, the Landbank said.

These include, but are not limited to, permanent working capital such as for the purchase of agricultural produce, acquisition of equipment, construction of facilities for linking of products to the market such as market infrastructure development and improvement, mobile palengke, collection and buying stations, and other related facilities.

LGUs with loans for programs and projects that provide basic and support services, social welfare and healthcare, and other infrastructure activities that aim to bring back confidence of the people and spur the local economy and businesses are also eligible to avail of the interest subsidy, according to the bank.

The loan for such projects shall bear a fixed interest rate of 4% per annum until the end of 2022, wherein the remaining 2% interest rate shall be charged to the LGU.

Interest rate shall be subject to annual repricing thereafter based on benchmark rate plus applicable credit spread based on credit rating of the borrower, but shall not be lower than 4% per annum.

Borrowers may pay their loan up to 15 years inclusive of up to three years grace period on principal payable based on cash flow.

The interest rate subsidy will be made available to LGUs with approved accounts under Landbank’s RISE UP LGUs (Restoration and Invigoration package for a Self-sufficient Economy towards Upgrowth for LGUs) Lending Program which was launched last July, to support LGUs in the implementation of their local economic recovery plans.

As of November 30, 2020, the state lender said it has approved loans to 156 LGUs amounting to P52.27 billion under the RISE UP LGUs Lending Program. -MDM, GMA News