Republic of the Philippines
HOUSE 0F REPRESENTATIVES
Quezon City, Metro Manila
NINETEENTH CONGRESS
First Regular Session
HouseBiuNo.8404
Introduced by Representative Midy N. Cua
Lone District, Quirino
AN ACT EXPANDING THE POWHR 0F LOCAL GOVHRNMENT UNITS T0 CREATE
INDEBTEDNnss AND TO ENTER INTO CREDIT AND OTHER FINANclAL
TRANSACTIONS, AMIINDING FOR THH PURPOSH REPUBLIC ACT NO. 7160, AS
AMENDED, OTHHRWISE KNOWN AS TIIE ``LOCAL GOVERNMENT CODH OF 1991,"
AND FOR OTHER PURPOSES
HXPLANATORY NOTE
Title IV of Republic Act No. 7160, otherwise known as the "Local Government Code of 1991," gives
local  government units  (LGU) the  power to  create  indebtedness  and to  enter into  credit  and other
financial transactions. Under the law allows LGUs may finance local infrastructure and other socio-
economic development projects using debt. However, the interpretation of the law has been limited to
the  financing  of capital  outlay  expenditures.  This has prevented  LGUs  from using  debt  to  finance
persormel services (PS) and maintenance and other operating expenses (MOOE) that are also integral
to the implementation of socio-economic proj ects.
The proposed measure allows LGUs to secure credit financing to  fund PS and MOOE for a limited
period of time. The proposed credit window shall be triggered by a significant decrease in the internal
revenue   allotment   (IRA)   of  LGUs   as   determined   by   the   Development   Budget   Coordination
Committee and the Union of Local Authorities of the Philippines.
The proposed measure is timely given the  14.5% decrease in IRA from P959.04 billion in FY 2022 to
P820.27  billion  in  FY  2023.   In  addition,  the  proposed  amendments  to  the  law  provide  for  a
mechanism that will be readily available should another decline in the IRA take place.
In view of the foregoing, approval of this measure is eamestly sought.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila
NINETEHNTH CONGRESS
First Regular Session
HouseBinNo.6404
Introduced by Representative Midy N. Cua
Lone District, Quirino
AN ACT EXPANDING THH POWER OF LOCAL GOVERNMENT UNITS T0 CREATE
INDEBTEDNESS AND TO ENTER INTO CREDIT AND OTHER FINANCIAL
TRANSACTIONS, AMENDING FOR THH PURPOSH REPUBLIC ACT NO. 7160, AS
AMENDED, OTHHRWISE KNOWN AS TIIE ``LOCAL GOVHRNMENT CODE OF 1991,"
AND FOR OTHER PURPOSHS
Be it enacted by the Senate and House Of Representatives Of the Philippines in Congress as.sembled:
SECTION I. Sfaorf rr.f/e. -This Act shall be known as the "Expanded LGU Credit Financing Act."
SEC. 2. Section 296 of Republic Act No. 7160, as amended, is amended to read as follows:
"SEC: 296. General Policy. ~
(a)  It   shall   be   the   basic   policy   that   any   local   government   unit   may   create
indebtedress, and avail of credit facilities to finance [local infrastructure and other
socio-economic     development    projects]     THEIR    ANNUAL    BUDGET    in
accordance  with  the  approved  local  development  plan  and  public  investment
Program.
(b)  A  local  government  unit  may  avail  of credit  lines  from  government  or private
banks and lending institutions for the purpose of stabilizing local finances.
SHC. 3. Section 297 of Republic Act No. 7160, as amended, is amended to read as follows:
(a)   A   local   government   unit   may   contract   loans,   credits,   and   other   forms   of
indebtedness  with  any  government  or  domestic  private  bank  and  other lending
institutions  to  finance  the  construction,  installation,  improvement,  expansion,
operation,  or  maintenance  of public  facilities,  infrastructure  facilities,  housing
projects, the acquisition of real property, and the implementation of other capital
investment projects, subject to such terms and conditions as may be agreed upon
by the local government unit and the lender. The proceeds from such transactions
shall accrue directly to the local government unit concerned.
(b)   A  local  goverrment  unit  may  likewise  secure  from  any  government bank  and
lending  institution  short,  medium  and  long-term  loans  and  advances  against
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security   of   real   estate   or   other   acceptable   assets   for   the   establishment,
development,    or   expansion   of   agricultural,    industrial,    commercial,   house
financing projects, livelihood projects, and other economic enterprises.
(C)  FOR A LIMITED PERIOD OF TIME, A LOCAL GOVERNMENT UNIT MAY
SEcuRE  CREDIT  FINANCING  To  FUND  pERSor`INEL  SERvlcEs  AND
MAINTENANCE   AND   OTHER   OPERATING   EXPENSES.   PROVIDED,
THAT  THE  AFOREMENTIONED   WINDOW  FOR  CREDIT  FINANCING
SHALL   BE   TRIGGERED   BY   A   SIGNIFICANT   DECREASE   IN   THE
INTERNAL  REVENUE  ALLOTMENT  OF  LOCAL  GOVERNMENT  UNITS
AS  DETERMINED  BY  THE  DEVELOPMENT  BUDGET  COORDINATION
COMMITTEE   AND   THE   UNION   OF   LOCAL   AUTHORITIES   OF   THE
PHILIPPINES.  PROVIDED,  FURTHER,  THAT  THE  AFOREMENTIONED
WINDOW SHALL REMAIN OPEN FOR A PERIOD NOT EXCEEDING FIVE
(5) YEARS.
([c]d)  Government  financial  and  other lending  institutions  are  hereby  authorized  to
grant loans, credits, and other forms of indebtedness out of their loanable funds to
local government units for purposes specified above.
SHC.   4.   Jmp/eme#fj.#g  Rw/es   a#d  RegwJ¢jz.o#s.   -   The   Development   and   Budget   Coordination
Committee  and  the  Union  of Local  Authorities  of the  Philippines  shall  formulate  the  rules  and
regulations for the effective implementation of this Act within one (1 ) of its effectivity.
SEC. 5. j2epec!/!.ng C/crc4se. -Alllaws, decrees, executive orders, rules and regulations or parts thereof,
which are inconsistent with this Act, are hereby repealed, amended or modified accordingly.
SEC 6. Sepczrobz./I.ty CT/¢ilse. - If any provision of this Act is held unconstitutional or invalid, all other
provisions not affected thereby shall remain valid.
SEC.  7. EjrGcfg.vz.ty. -This Act shall take effect  fifteen (15)  days  after its publication in  the  Q#}cz.#/
G¢ze#e or in a newspaper of general circulation.
Approved,
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