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Limits on borrowings of LGUs

In accordance with MB Resolution No 7, all banks are advised to require the submission of Certificate of Net Service Ceiling and Borrowing, issued by the Bureau of Local Government on Finance from an LGU-borrower, as instructed by the Executive Director of said bureau in her letter dated February 7, stating that banks and other lending institutions should exercise due diligence in the granting of loan to LGUs by reviewing their paying capacities and the viability of projects to be funded from the proceeds of the loan…since the BLGF cannot legally impose a cap  on LGU borrowings. These limitations are evident in the formula stipulated in the Computation for Debt Service and Borrowing Capacity, which explains, among others, the maximum amount that an LGU can appropriate for the payment of obligations.

To know more about the computation breakdown and details of the circular letter, please click the attached link  cl030.

This circular letter was issued on 27th of April for guidance and strict implementation.