[ Manila Bulletin Online ] July 7, 2008
By LEE C. CHIPONGIAN
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has approved government financial institutions (GFIs)’ securitization of some P14-billion local government units’ (LGUs) internal revenue allotment (IRA).
The BSP has allowed GFIs Land Bank of the Philippines and Development Bank of the Philippines (DBP) to invest directly in the LGU securitization.
Land Bank and DBP will have a 50-50 sharing of the funds. Land Bank will put up a special purpose vehicle unit which will handle the LGU receivables. The bank will purchase the investment certificates that will be issued.
This is the third LGU securitization exercise. However the difference is that instead of auctioning off the investment certificates, the GFIs will be the one purchasing these.
In 2006, the GFIs issued P9.8-billion worth of MIRACLE (Monetization of IRA Collectibles for Local Empowerment) Investment Certificates out of the P14.3-billion IRA receivables.
About 21, 291 local government units participating in the MIRACLE program was able to monetize their receivables at a discount of 29.84 percent. They used the cash to advance their respective shares from the IRA balance withheld in 2000 and 2001. This year’s exercise is the IRA balance from 2001-2004.
The LGUs converted the receivables into cash at a discounted amount using the budget department’s Notices of Payment Schedules.
The MIRACLE program is an offshoot of a Malacanang executive order 494 issued on January 18, 2006. The EO instructed the Department of Finance, the Department of Budget and Management and the Department of Internal Local Government to take steps to ensure that affected LGUs get their respective shares from the total IRA balance of P17.5 billion.
The bonds were backed up by unpaid IRAs of LGUs. The transactions were acknowledged as a direct, absolute and unconditional obligation of the National Government as provided in a letter of confirmation issued by the DoF.
_____________________________________________________________________
