The Asian Development Bank (ADB) said Friday it has approved a fresh $400-million policy-based loan to the Philippines to aid in improving local governments’ capacity to provide high-quality public services, especially during the COVID-19 pandemic.
In a statement, the Manila-based multilateral lender said the new policy loan under the Local Governance Reform Program Subprogram 2 will help strengthen local government units’ (LGUs) service delivery framework, modernize local public financial management, and improve LGUs’ financing and investment framework.
“Much is expected from LGUs, especially now, as they are at the forefront of public service delivery during the COVID-19 pandemic,” said ADB public finance economist for Southeast Asia Aekapol Chongvilaivan.
“The reform program will help ensure local governments have the capacity and adequate resources to quickly respond to the basic needs of local communities at critical times like this,” Chongvilaivan said.
Under the new program, the ADB said it will be supporting reforms to move national government functions to the LGUs based on the 1991 Local Government Code.
It said another reform will increase revenue allocations to LGUs under a Supreme Court ruling, which clarified the scope of LGUs’ share of national taxes.
President Rodrigo Duterte issued Executive Order 138 in July, which establishes a Committee on Devolution (ComDev) for the implementation of the July 2018 Supreme Court ruling widening the base of the LGUs’ share in taxes.
The so-called Mandanas ruling expands the LGUs’ internal revenue allotment share to all national taxes including those collected by the Bureau of Customs.
The Supreme Court ruling favoring increased share of taxes for LGUs stemmed from the petition filed by then Batangas Representative Hermilando Mandanas.
The new program builds on ADB’s support since 2006 to help the Philippines boost efficiency, accountability, and transparency in local governments’ financial management and service delivery, the lender said.
A $300 million policy-based loan in 2019 helped the government create a legal and institutional framework to mobilize local revenues, the ADB said.
A $26.5-million investment project in 2020 is supporting government initiatives and reforms to improve local governments’ real property tax collection, it added.
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