Local Government Finance in

the Philippines

Milwida M. Guevara
Synergeia
www.synergeia.org.ph
The Philippines

• 2,100 islands
• 76.5 million people
in 2000; 2.4 per cent growth annually (88.7
million by July 2007)
• 38 percent urban estimated to increase to
82 percent in 2020
 Our Local Governments

Provinces
81 Highly
Urbanized
Cities
33

Component
Municipalities Cities
1,510 85

Barangay
Barangays Barangays
41,994 41,994
Who does what?
• Provinces: Hospital and tertiary health services;
Low cost housing; telecommunications; Infra
from local funds; social welfare services
• Municipalities: Primary health care; school
building; solid waste disposal; cultural centers,
parks, tourism facilities
• Barangay (Village) : health center, day care, solid
waste collection, reading center
• Cities: All of the above
Vertical Fiscal Imbalance
Revenues and Expenditure Shares of Central and Local
Governments, 2004

120

100

80
Local
60
Central
40

20

0
1 2
Local 8.1 20.48
Central 91.9 79.52
Revenues Expenditures

LGU revenues do not match their expenditures.

Financial Dependence of LGUs on
Central Government

Grants and Revenues of Local

Governments Percent of
grants to total
revenues of
Percent to total

80 LGUs
Revenues of

Percent of local
60 sources to total
LGUs

revenues of
40
LGUs
20 Percent of real
property tax to
0 total revenues of
1989 1993 1997 2002 LGUs
Percent of
Year business taxes
to total revenues
of LGUs
 The Road to a Robust Local
Finance
• Definition of Minimum standards for
public services, e.g. P10,000 per
elementary student
• Grant system that equalizes needs and
resources
• Productive, flat and simple to administer
local taxes
• Systems and processes that promote tax
compliance and transparency
Out of the Box Strategies—Policy
framework that supports:
• Public-private sector partnerships
• Development of a credit market
* Special Purpose Vehicles
* Bond financing
* Credit rating for LGUs
* Local Government Guarantee Corporation
* Municipal/City Banks?
• Municipal Development fund for less capable
LGUs