IMPLEMENTING THE FINANCING POLICY FRAMEWORK FOR LOCAL GOVERNMENT UNITS BY IDENTIFYING NEW SOURCES OF FUNDING FOR FIRST TIER LOCAL GOVERNMENT UNITS UNDER REPUBLIC ACT NO. 7160

WHEREAS, in order to expand available credit financing sources for
Local Government Units (LGUs) and free up limited financing sources to
LGUs with the most need, the Department of Finance (DOF), pursuant to
its mandate under the Philippine Development Forum (PDF), formulated in
2006, the LGU Financing Policy Framework of the Philippines (LGU
Financing Framework) which declared as policy a segmented approach for
the credit financing program of LGUs based on the varying levels of
credit worthiness and credit need, thus qualifying the most creditworthy
LGUs to avail not only of government but also non-government,
commercial or other sources of capital;

WHEREAS, the LGU Financing Framework envisions lower income LGUs
having greater access to Municipal Development Fund Financing, with
moderately credit worthy LGUs having greater access to Government
Financial Institution financing, and with the most credit worthy LGUs
(First Tier LGUs) having direct access to domestic or international
commercial or other financing;

WHEREAS, Section 296 of Republic Act No. 7160, otherwise known as the
Local Government Code, authorizes LGUs to create indebtedness and avail
of credit facilities to finance local infrastructure and other
socio-economic development projects in accordance with approved local
development plans and public investment programs;

WHEREAS, Section 297 of the Local Government Code allows LGUs to
source financing not only from government or domestic private banks but
also from other lending institutions;

WHEREAS, Section 298 of the Local Government Code allows LGUs to
acquire property, plant and equipment under a supplier’s credit,
deferred payment plan, or other financial schemes;

WHEREAS, Section 299 of the Local Government Code allows LGUs to
issue bonds, notes, and other evidences of indebtedness to finance
self-liquidating, income producing development or livelihood projects;

WHEREAS, Section 300 of the Local Government Code allows LGUs to secure loans from other LGUs;

WHEREAS, Section 301 of the Local Government Code allows LGUs to
source additional financing from loans secured by the National
government from foreign financial institutions or other international
funding agencies pursuant to the power of the President to directly or
indirectly relend such loans to LGUs;

WHEREAS, the loans and credits secured by LGUs under the aforestated
provisions of the Local Government Code are to accrue directly to the
LGUs concerned;

WHEREAS, in light of the current global financial crisis, there is an
urgent need to reallocate the resources of the National Government for
its own priority projects and to thus, rationalize and revitalize the
sources from which LGUs can fund their projects, pursuant to their
powers under the Local Government Code and in accordance with the LGU
Financing Framework.

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law, do hereby
order:

SECTION 1. The Department of the Interior and Local
Government (DILG) and the Department of Finance (DOF) are hereby
directed to implement the LGU Financing Framework and shall, for this
purpose, ensure that First Tier LGUs be allowed and assisted to directly
contract loans not only with Government Financial Institutions (GFIs)
and the Municipal Development Fund Office (MDFO) but also with
multilateral financial institutions created by multilateral treaties or
agreements to which the Philippines is a signatory (MFIs); Provided,
that other agencies of the government, including the Department of
Justice (DOJ), the Department of Education (DepEd), and the Department
of Public Works and Highways (DPWH), are likewise directed to provide
and extend full support to the DILG and DOF so as to allow the full and
immediate implementation of the LGU Financing Framework; Provided
further, that any such loan obtained by any such qualified First Tier
LGU shall be on a stand-alone basis without any direct or indirect
National Government guarantee; Provided further, that the DOF shall
formulate the necessary Implementing Rules and Regulations to ensure
prudent borrowing of these LGUs.

SECTION 2. All other rules, regulations, and issuances,
or parts thereof, which are inconsistent with this Executive Order are
hereby deemed repealed or modified accordingly.

SECTION 3. This Executive Order shall take effect immediately.

Adopted: 09 June 2009

(SGD.) GLORIA M. ARROYO
President of the Philippines   

BY THE PRESIDENT:

(SGD.) EDUARDO R. ERMITA
Executive Secretary