DOF calls on LGUs to avail loans for COVID-19 recovery efforts

The Department of Finance (DOF) is calling on local government units (LGUs) to tap the P300-billion credit financing window under state-owned Land Bank of the Philippines to bankroll projects to help in the recovery from the economic crisis induced by the COVID-19 pandemic.

According to the DOF, only around 35% to 40% of provinces, cities, and municipalities have tapped into the LandBank's P300-billion facility, with some P180 billion still available for LGUs to borrow at 10-year terms at an interest rate of 4 to 4.5%.

"I want to point out that the actual borrowings of LGUs are far below their capacity. They have only borrowed less than half. There is a lot of capacity, but there is no utilization of that capacity," Finance Secretary Carlos Dominguez III was quoted as saying in an emailed statement.

"The national economy, after all, is the sum of all our local economies. LGUs are at the frontline of serving vulnerable communities. You are also catalysts for building a new economy while we do all we can to address this global health emergency," he added.

The statement came as several local governments are reeling in the effects of typhoon Rolly (international name: Goni), previously classified as a super typhoon.

In the same statement, Dominguez also responded to concerns over the interest rate on the loan program for LGUs under the Bayanihan to Recover as One Act or Bayanihan 2 signed into law by President Rodrigo Duterte in September.

The law allocates P50 billion for government financial institutions — LandBank, Development Bank of the Philippines, Philippine Guarantee Corp., and Small Business Corp. — to provide soft loans to affected sectors.

Loans entered into by LGUs under such provision, however, will have subsidized interest only until December 31, 2022, and subject to annual repricing in the succeeding years.

"There is no certainty as to what the interest rate regime will be next year, or the year after, or in 2023, there is none, it's a market. The price of money is going to change, I don't know whether it will go up or go down," said Dominguez.

"Nobody can tell you 'Oh, the interest rate is going to be fixed for so long,' unless you pay a premium for that," he added.—AOL, GMA News