Банкеръ Weekly

Briefs

MUNICIPALITIES WILL PAY THEIR DEBTS

Financial obligations, undertaken on behalf and at the expense of the municipality will be paid by the local budgets, the Government-approved bill on the municipal liabilities stipulate. The bill was drafted by a panel of experts, headed by Deputy Finance Minister Kiril Ananiev, which included representatives of the Ministry of Regional Development and Public Works, the National Association of Municipalities and MPs. The forthcoming passing of the law is in compliance with the Government's programme of 2002 for financial decentralization. Municipal debt cannot be guaranteed by the State and is not a liability of the government, the draft bill reads. An exception are the cases when the local government's debt has been secured by a State guarantee. The municipalities may be indebted for up to one year, but when gathering finances for investment projects, for refinancing current payments, for preventing consequences of natural disasters, etc., the term could be longer. Municipalities shall be allowed to close short-term loans (up to twelve months) for financing public services, in time of a temporary shortage of funds, for capital expenses, and others. If the draft bill on municipal liabilities is approved by parliament, the local administration will have the opportunity to guarantee in future its liabilities by all pledges, admissible under the Liabilities and Contracts Act, with the exception of a pledge or mortgage of public municipal property. The minimum and maximum size of the debt within the respective budget year shall be approved at sessions of the municipal councils. The draft stipulates as well that payments of municipal liabilities should not exceed 25% of the amount of the individual proceeds of each municipality and the equalizing subsidy until its most recent annual financial report.

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