Section 2
SEC. 2. Sources and Operations of Fund—The MDF shall be capitalized and funded by proceeds of foreign loans, assistance or grants which are to be made available to the Local Government for specific purposes, project components and activities set forth in international agreements, entered or to be entered into by the Government of the Philippines with foreign governments and international institutions (IBRD, ADB, USAID, etc). Foreign loans and assistance released and credited to the MDF shall be covered by Advice of Allotment and Cash Disbursement Ceiling. Funds from the MDF shall be made available to the local governments as loans which shall be treated as trust fund and amortized by the local governments, out of their general fund sources. The amortization (interests and principal) made by the local governments to the MDF shall form part of and accrue to the MDF and shall be made automatically available for relending to finance other similar projects of the local governments. The local governments shall include in their annual/supplemental budget the proceeds of loan from the MDF, their utilization as well as amortization.