The Bureau of Local Government Finance (BLGF) said they “concur in principle” with the Cebu city government’s proposed debt prepayment of the city’s loan from the Japan International Cooperation Agency (JICA).
In a letter responding to Cebu City Mayor Michael Rama’s Aug. 19 request to Finance Secretary Cesar Purisima, BLGF executive director Salvador del Castillo said four requirements still need to be fulfilled to ensure that the proposal is in order.
The P4.65 billion loan or about 12.315 billion yen contracted by the Cebu city government in 1996 went to finance the reclamation of the 300-hectare South Road Properties (SRP) project.
At present, the city still owes JICA over P2.3 billion, which will be settled in 2025.
Rama wrote Finance Secretary Purisima stating that the debt repayment is within the city’s debt servicing limit.
The mayor included the debt repayment of P2.3 billion plus P60.5 million for the pre-termination fee and P4.3 million in interest in the supplemental budget which is still being deliberated on by the Cebu City Council.
The supplemental budget will be sourced from the P8.375 billion payment by the consortium of SM Prime Holdings, Cebu Holdings Inc. and Ayala Land which represents half of the P16.7 billion bid price for two lots in the SRP.
But Castillo said the BLGF wants the city to review the existing loan agreement with JICA “to ensure that the prepayment of loan, including any associated costs, is allowed by the agreement.”
BLGF also requires an ordinance or resolution from the City Council authorizing the mayor to negotiate with JICA as well as an appropriation ordinance that authorizes the debt repayment plan.
Castillo said the city government should also review other clearances issued by the national government to the city government when the JICA loan was negotiated in 1996.
As to Rama’s position that the debt repayment is within the city’s debt servicing limit, Castillo referred to Section 324 (b) of the Local Government Code which stated “that appropriations for debt servicing shall not exceed 20 percent” of an LGU’s regular income.