ADB extends $250 M to assist Phl LGUs

MANILA, Philippines (Xinhua) - The Asian Development Bank (ADB) said Friday that it has approved a loan of $250 million for a project which seeks to boost the financing system of local government units (LGUs) in the Philippines.

The Manila-based lender said in a statement that its Board of Directors approved the loan on Thursday. The reform program will receive parallel co-financing of $150 million from the Agence Francaise de Developpement or French Agency for Development.

ADB said the money will be used mainly to fund a government-led, comprehensive review of the Local Government Code or Republic Act 7160 to boost municipal revenues and address regional disparities in living standards.

While the national government has undertaken steps to improve the financing systems of LGUs, ADB said weak local tax bases and " flaws" in the design of transfers made it difficult for poorer local governments to deliver services to their constituents.

The Manila-based lender said the project aims to institute reforms such as performance-based mechanisms and the "Bottom-up- Budget" scheme which can improve budget transparency and alignment of national and local development priorities.

ADB noted that LGUs represent close to 17 percent of total government expenditures and play a critical role in the provision of basic services.