ADB OKs $250-M loan for LGU reform program

Posted at 02/14/2014 5:02 PM | Updated as of 02/14/2014 5:02 PM

MANILA, Philippines – The Asian Development Bank (ADB) has approved a $250 million loan to support the Philippines’ local government finance and fiscal decentralization reforms.

The loan will pave the way for a government-led and comprehensive review of the Local Government Code, a first since the code was enacted in 1991.

“The Philippines has taken significant steps to improve the financing system of Local Government Units (LGUs) and to foster transparent and accountable local governance practices. Reforms should help raise revenues and therefore improve services,” said ADB Senior Public Management Specialist-Southeast Asia Juan Luis Gomez.

The review will address regional disparities in living standards caused by weak local tax bases and flaws in the design of transfers.

LGUs in the country represent nearly 17 percent of the total government expenditures and play an important role in the provision of basic services like health, education, or housing and community development.

The reform program includes performance-based mechanisms such as the Performance Challenge Fund and the “Bottom-up-Budget,” which can improve budget transparency and alignment of national and local development priorities.

It will receive parallel cofinancing of $150 million from the Agence Française de Developpement.