Republic of the Philippines

D E P A RT M E N T O F F I N A N C E
BUREAU OF LOCAL GOVERNMENT FINANCE

Certificate of Net Debt Service Ceiling

and Borrowing Capacity
(CNDSCBC)
 The Bureau of Local Government Finance
• Attached agency of the DOF; Supports the DOF in its
mandate to supervise the revenue operations of all local
government units
• Central Office in Manila, with 16 Regional Offices
• Mandated to develop and promote plans and programs for
the improvement of resource management systems,
collection enforcement mechanisms and credit utilization
schemes at the local levels
• Issues Certificate of Net Debt Service Ceiling (NDSC) and
Borrowing Capacity (BC) to LGUs
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 Policy Thrust and Legal Framework

Local Debt Policy

• Build capacity of local governments to borrow
money to cover their expenditure responsibilities,
devolved functions
• Prioritize financing capital infrastructure
expenditure and tax flows and to foster political
accountability out of these decisions
• National Government has to manage LGU debts
to:
• Prevent a systemic LGU debt crisis that could force the
National Government to bail out heavily indebted LGUs
• Strengthen the implementation of the statutory limit on LGU
debts
• Promote responsible and credible debt management among
LGUs

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 Policy Thrust and Legal Framework

Legal Framework
Sec. 296 of LGC, Art. 395 LGC IRR Sec. 324 of LGC
LGUs may create indebtedness and avail of Appropriations of 20% of the LGU’s
credit facilities for local infra and socio- regular income for debt servicing
economic development projects with
government or private banks and lending
institutions

Art. 403 LGC IRR EO 127

DOF mandated to render technical BLGF to develop and promote
assistance to any LGU in the availment plans and programs for the
of credit facilities, flotation of bonds, improvement of resource
contracting of loans and issue management systems, collection
guidelines for the purpose enforcement mechanisms and
credit utilization schemes at the
local levels

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 Policy Thrust and Legal Framework

Forms of Local Limited Purpose

Indebtedness
o Loans, Credits and Other ✓ Construction, installation, improvement,
Forms of Indebtedness expansion, operation, or maintenance of
public facilities, infrastructure facilities,
o Deferred Payment and housing projects, acquisition of real
Other Financial Schemes property, and the implementation of other
o Bonds and Other Long- capital investment projects
Term Securities ✓ Establishment, development, or expansion of
agricultural, industrial, commercial, house
o Inter-Local Government financing projects, livelihood projects, and
Loans, Grants, and Other other economic enterprises
Subsidies
✓ Acquire property, plant, machinery,
o Loans from funds secured equipment, and such necessary accessories
by National Government ✓ Finance self-liquidating, income-producing
from foreign sources development or livelihood projects

5
Potential Projects Through Credit

03 04
02 05
01 06

07 12
08 11
09 10

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 Policy Thrust and Legal Framework

Ex-ante control and regulations

DOF/BLGF Regulations

• LGU debt service ceiling and ✓ Local Finance Circular (LFC) No. 1-2000: issued to
enhance the access of all LGUs to credits and other forms of
net borrowing capacity indebtedness
determined and certified by
✓ LFC No. 01-2012: Amended the previous LFC to ensure a
BLGF more accurate and appropriate evaluation of the maximum
• Monetary Board opinion on the borrowing and debt servicing capacities of all LGUs
monetary and balance of ✓ LFC No. 01-2014: Reduced requirements for 171 LGUs
payments implications affected by Typhoon Yolanda, from 12 to 4 requirements, and
extending the validity by 1 year
• Local legislative ordinance and
inclusion in the annual investment ✓ DOF Department Order No. 54.2016: Streamlined
plans and priorities are required requirements and process: 4 documents; Well-defined
computational parameters; Improved certification process;
Verification/ validation delegated to BLGF Regional Offices

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 Policy Thrust and Legal Framework

Ex-ante control and regulations

BSP Monetary Board Regulations
• LGU debt service ceiling and net ✓ Circular No. 402: Revised Guidelines on the Flotation of
borrowing capacity determined Bonds by LGUs Without NG Guarantee in 2003
and certified by BLGF
✓ Circular Letter No. CL-2008-050: Reminder to all banks
• Monetary Board opinion on on prior MB Opinion under Sec. 123 of R.A. No. 7653;
the monetary and balance of ✓ Circular No. 769: 2012 Guidelines on Requests for MB
payments implications Opinion of Proposed Domestic Borrowings by LGUs
• Local legislative ordinance and ✓ Circular No. 797: Enforcement Actions on Banks in
inclusion in the annual investment Relation to Sec.123 of R.A. No. 7653 (2013)
plans and priorities are required
✓ Circular No. 819: 2013 Amendments to Circular No. 769
✓ Circular No. 926: 2016 Guidelines in Processing Requests
for MB Opinion

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 Policy Thrust and Legal Framework

Ex-ante control and regulations

Requirements for LGUs
• LGU debt service ceiling and net Bonds and loans require approval of the local legislative
borrowing capacity determined and council
certified by BLGF
✓ Local chief executive must be authorized by the local
• Monetary Board opinion on the legislative council through a Resolution to negotiate, enter
monetary and balance of into, and sign contracts for and in behalf of the local
payments implications government
• Local legislative ordinance ✓ Proposed project to be financed by the loan is included in
and inclusion in the annual the Approved Annual Investment Plan (AIP) for the current
year
investment plans and
✓ BSP requires the submission of a duly executed ordinance
priorities are required approving the proposed borrowing, its purpose, terms and
conditions for the release of Loan Proceeds

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 Local Government Lending Institution Bureau of Local Government Finance Bangko Sentral ng
Unit (LGU) (BLGF) Pilipinas

Local Council, through a Pre-Evaluation/Setting of

BLGF-RO BLGF-CO Evaluate LGU request
Resolution/Ordinance, authorizes the Terms and Conditions
and supporting
Local Chief Executive to negotiate
Evaluate LGU request and supporting documentary
and contract loans and other forms
documentary requirements Final computation requirements
of indebtedness
and issuance of
certificate of
NDSCBC
Submit Letter of Intent and negotiate Documents
with the lending institution Complete/ Compliant?
No
Submit to BLGF a written request for certification of LGU Net Debt
Service Ceiling and Borrowing Capacity, with complete supporting Yes
documents pursuant to DOF Department Order 054.2016 Monetary Board renders
Evaluate financial Opinion on the Monetary
reports of the LGU Balance and Payments
Submit the required additional documents implications of the
proposed LGU
borrowing, per BSP
Compute preliminarily LGU Net Debt Service
Circular No.926 s. 2016
Ceiling and Borrowing Capacity (NDSCBC)
Renegotiate with the lending institution for lower interest rate,
longer tenor, or consider other lending institutions, then
resubmit to BLGF Submit to BLGF-CO all documentary
requirements and the preliminary
Yes computation for the issuance of certificate of
NDSCBC
Proposed Loan Higher than BLGF Certification?

No

Submit to BSP a written request for Monetary Board Opinion

Submit to the Lending Institutions the BLGF

Approval and Signing of Loan Receive LGU Post
Certification, MB Opinion and Other
Agreement with the LGU Borrowing Report Receive LGU Post-
Requirements
Borrowing Report
Record receipt of Loan Proceeds and
prepare borrowing reports for submission Release of Loan
to BLGF-RO and BSP

LGU Loan Application Process 10

BLGF Certification Process
Bureau of Local Government Finance (BLGF)

BLGF-RO BLGF-CO
Evaluate LGU request and supporting documentary
requirements Final computation and
issuance of certificate of
Documents NDSCBC
Complete/ Compliant?

Evaluate financial reports of the

LGU

Compute preliminarily LGU Net Debt Service Ceiling and

Borrowing Capacity (NDSCBC)

Submit to BLGF-CO all documentary requirements and the

preliminary computation for the issuance of certificate of
NDSCBC 11
 BLGF Debt Capacity Certification

LGU Borrowing Capacity

1 Debt Service Ceiling (DSC)
• 20% x Annual Regular Income (ARI)
ARI is the average previous 3-year locally sourced income
+ other shares from national taxes based on COA data, +
actual annual IRA based on DBM data

2 Net DSC (NDSC)

• DSC less All amortizations payable during Local Fiscal Policy
the year Service
Local Debt Monitoring
3 Borrowing Capacity (BC) and Evaluation Division
• NDSC x Annuity Factor

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 BLGF Debt Capacity Certification

Documentary Requirements (LFC 01-2012)

Letter Request from Certification of Certification of No Certification of

the Local Chief Absence of Loan Incurred Default
Inclusion of Loan in the
Executive (if applicable) Annual Investment Plan

Certified Statement of Certification by the

Authenticated Copy of Income and Statement Lending Institution DILG Seal of Good
Sanggunian Resolution of Fund Operation (if not an authorized gov’t Housekeeping
(for foreign-assisted projects) depository bank or is required
by the DOF)

Certification of COA Annual Audit

Proof of Compliance Statement of Receipts Existing and
with Full Disclosure and Expenditures for Certificate for the
Approved Loans past three years
Policy of the DILG the past three years (if applicable)

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 BLGF Debt Capacity Certification

Documentary Requirements (DO 054.2016)

1 2 3 4

Letter Request from the Certification of existing loan/s Commission on Audit (COA) Certification
Local Chief Executive duly certified by the Local Annual Audit Certificate for issued by the LI
indicating the specific Treasurer indicating the most recent year stating that it
✓ Lending institution (LI); ✓ Types and purpose of loans & other showing no adverse finding shall not require
✓ Terms and condition of obligations contracted; against the LGU, and LGU deposits as
proposed loan; and ✓ Name of the LI; supported by the year-end compensating
✓ The purpose/s of the loan. ✓ Date of approval & maturity; financial reports balance for the
✓ Terms & conditions; ✓ Pre-closing trial balance; and loan (for non-
✓ Remaining balances of loans and ✓ Detailed Statement of authorized
other obligations; and Financial Performance government
✓ Annual amortization schedules depository banks)
from the LI

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 BLGF Debt Capacity Certification

Documentary Requirements
Should be supported by the Offer Sheet from the Lending
1 Institution indicating the specific
✓ Specific loan purpose
✓ Specified interest rate
✓ Amount of loan
Letter Request from the
Local Chief Executive ✓ Tenor and grace period
indicating the specific ✓ Fees and other charges
✓ Lending institution (LI); ✓ Security requirements
✓ Terms and condition of
proposed loan; and
✓ The purpose/s of the loan. The loan purpose, amount of loan, and interest
rate, among others, should be the same in the
Letter Request and Offer Sheet.

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 BLGF Debt Capacity Certification

Documentary Requirements
The Amortization Schedule from the Lending Institution
should include
2 ✓

✓
Name of project
Amount of loan
✓ Term and interest rate
Certification of existing loan/s ✓ Mode of payment
duly certified by the Local ✓ Periodicals
Treasurer indicating ✓ Outstanding Balance
✓ Types and purpose of loans & other ➢ Principal
obligations contracted; ➢ Interest
✓ Name of the LI;
✓ Date of approval & maturity;
➢ Total Amount Due
✓ Terms & conditions
✓ Remaining balances of loans and
other obligations; and
✓ Annual amortization schedules
Applying LGUs without existing loan still need to
from the LI submit Certification by the Local Treasurer.

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 BLGF Debt Capacity Certification

Documentary Requirements

For LGUs with adverse

findings on its latest Adverse findings refer to
3 COA Annual Audit
observations of COA on local
financial management and
Report, an Agency matters specifically concerning
Action and Status of the Local Treasurer, such as but
Commission on Audit (COA) Implementation not limited to:
Annual Audit Certificate for (AAPSI) duly received • Unremitted and undeposited
the most recent year by COA shall be collection;
showing no adverse finding
required. The status of • Unliquidated cash advances;
against the LGU, and • Unremitted mandatory
supported by the year-end recommendations in contributions of GSIS,
financial reports the AAPSI may be PAGIBIG, Philhealth,
✓ Pre-closing trial balance; validated by the BLGF, withholding tax to BIR; and
✓ Detailed Statement of if necessary. • Unreconciled cash book with
Financial Performance the Bank Reconciliation
Statement and Subsidiary
Ledger.

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 BLGF Debt Capacity Certification

Documentary Requirements
Latest DOF Policy on Depository Banks
4 Department Circular No. 002.2022 dated 16 May 2022
As amended by DC No. 003.2022
Amended Guidelines on Authorized Government
Certification Depository Banks (AGDBs)
issued by the LI • AGDBs per Sec. 5.2: LBP,
DBP, OFB, Al Amanah
stating that it
shall not require Islamic Investment Bank of the Philippines,
LGU deposits as and PVB.
compensating
balance for the
loan (for non-
authorized
government
depository banks)

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 BLGF Debt Capacity Certification

Local governments that cannot in any way provide the full documentary
requirements due to natural and/or man-made calamities, and have been
declared under state of calamity shall, for a period of one year from the
declaration of state of calamity, be required only to submit the letter-request
from the LCE and the certification from the local treasurer.

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BLGF Debt Capacity Certification
Features of BLGF
Certification
• 3 Parts: Letter to the Local Chief
Executive, Certificate, and
Directives to the Local Treasurer
• Controlled; original issued for
LGU, copy furnished the
Lending Institution and BSP
(MB)
• Compliant with BSP Circular
No. 926
• Free of charge

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 BLGF Debt Capacity Certification

Latest Memorandum Circular

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 BLGF Debt Capacity Certification

Latest Memorandum Circular

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 Local Debt Profile and Trends

Historical Data
Certificates Issued
(2011 to 2023)
516

413
384 372
340
313
279 291
262

177 168 188

157

• Election year

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 Local Debt Profile and Trends

Historical Data
Average Number of Issued Certificates in the past ten years
Region III 32
Region VI 26
Region IV-A 24
Region X 20
Region V 20
Region VIII 19
Region VII 17
Region IX 17
Region XI 17
Region II 17
Region XII 16
Region I 16 With an average of 291
Region XIII 15 certificates issued annually,
BARMM 14 11% or 32 certificates are
Region IV-B 11
CAR 7 issued to LGUs in Region III.
NCR 5
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 Local Debt Profile and Trends

2022 Statistics
Financial Institution
Outstanding Balances Ratio of Balances per
Government Financial Institutions:
(Php B) Financial Institution
Land Bank of the Philippines 91.36
Development Bank of the Philippines 68.64
3.34%
LOANS

Municipal Development Fund Office 8.70

Sub-total 168.71

Private Financial Institutions:

Philippine National Bank 2.82
Philippine Veterans Bank 2.55
EastWest Bank 0.38
Asia United Bank 0.04 96.66%
Sub-total 5.78
Grand Total 174.49
BONDS

Outstanding Balances
Financial Institution
(Php B)
Philippine Veterans Bank 0.05
Grand Total 0.05
GFI PFI

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 Local Debt Profile and Trends

Loan Purpose/s Availed by LGUs

Nature of Investment Loan Purpose by Sector
79.78% 53.80%
75.44%

41.47%

25.87%
2%
18.75%
Infrastructure Capital Others
12.42%
projects Investment

For the past two years, at least 75% of the

issued Certificates were intended for
infrastructure and capital investment projects Economic Education, General Housing and Health,
(lot acquisition, procurement of heavy Services Culture, and Public Community Nutrition,
equipment and service vehicles). Two percent Sports Services and
is issued to LGUs to refinance/restructure Population
their existing loans. Control

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Credit financing has a vital role in local development
when used responsibly and strategically.
It must also always be
viewed in the context of
building local revenue
autonomy and improving
the quality of public
service delivery.

Maraming Salamat!