NEW DEBT sought by local government units (LGUs) declined 73.36% year on year to P20.96 billion in the nine months to September, the Bureau of Local Government Finance (BLGF) reported.

Debt applications are extracted from the BLGF-issued certificate of net debt service ceiling and borrowing capacity, of which 122 were released during the period, including seven amendments, well below the 309 issued a year earlier.

These certificates were issued to 88 municipalities, 24 cities, four provinces, and six barangays.

Cities applied to borrow P8.56 billion, followed by municipalities (P8.32 billion), provinces (P4.82 billion), and barangays (P24.6 million).

The certifications are a leading indicator for the borrowing intentions of local governments, whose capacity for taking on debt must be certified by the BLGF, an arm of the Department of Finance.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the decline to the election-related ban on some government spending and increased National Government allocations to LGUs, thereby reducing borrowing requirements.

“Furthermore, this may also be due to more disciplined spending by the government to narrow the budget deficit and reduce the growth in the government’s borrowings/debt as part of the fiscal reform measures,” Mr. Ricafort said.

The Bureau of the Treasury estimated the budget deficit at P72 billion in August, 40% lower than the year-earlier level of  P121 billion.

In the nine months to September, LGUs’ total borrowing capacity was P52.73 billion, 75.12% lower than the P211.98 billion from a year earlier.

Cities had a borrowing capacity of P27.78 billion, followed by municipalities (P21.61 billion), provinces (P6.05 billion), and barangays (P37.24 million).

In September, the BLGF released six certifications to LGUs, with no amendments, covering proposed loans worth P695.91 million, against P2.11 billion from a year earlier.

Mati City, Davao Oriental was the leading availer of loans in September with P399.21 million. This was followed by Quezon, Bukidnon which availed of P130 million in loans, and Cabugao, Ilocos Sur with P85 million.

Other LGUs that availed of loans were Allacapan, Cagayan (P46.7 million), Banayoyo, Ilocos Sur (P25 million), and Ocampo, Camarines Sur (P10 million).

The government registered a debt-to-gross domestic product (GDP) ratio of 62.1% in the second quarter, above the 60% debt-to-GDP ratio considered manageable by multilateral lenders for developing economies. The ratio eased from 63.5% at the end of the first quarter.

The government estimates the debt-to-GDP ratio to drop to 61.8% at the end of the year. — Keisha B. Ta-asan