DOF URGES LGUS TO MANAGE CAPITAL BETTER

Finance Secretary Benjamin Diokno called on local governments (LGUs) to set up plans on capital investments in order to fund basic services and local development projects, as they need to optimize increased revenue shares under the Mandanas ruling.

Based on separate petitions filed by Batangas Gov. Hermilando Mandanas and former Bataan Gov. Enrique Garcia Jr., the Supreme Court ruled that the just share of LGUs from the national taxes is not limited to “national internal revenue taxes” collected by the Bureau of Internal Revenue but includes collections by the Bureau of Customs.

“[A]s we implement the full devolution of certain functions from the executive branch to local governments pursuant to Executive Order (EO) No. 138, series of 2021, [LGUs] are confronted with the challenge of funding the expanded scope of basic services and local development projects,” Diokno said. “It is therefore imperative that LGUs put in place plans on capital investments.”

EO 138 was issued to support the efficient implementation of the Supreme Court ruling on the Mandanas-Garcia case. The order strengthened the autonomy and empowerment of LGUs, and directed the full devolution of certain functions of the Executive Branch to the LGUs.

Also, EO 138 granted LGUs, among others, the ability to borrow resources to improve local facilities and services.

But, Diokno said, LGUs have a low appetite for borrowing—with barely two in every three LGUs availing of credit in the past five years.

In 2021, LGU borrowings amounted to just P136.6 billion or around 0.74 percent of the country’s gross domestic product.

Diokno said that the DOF-supervised Bureau of Local Government Finance, which is tasked to monitor and evaluate LGU borrowings, noted that LGUs were only able to use 51.5 percent of their borrowing capacity in the past five years.