Development and Finance from issue 2010/1

Péter Halmosi

Risks Regarding Local Government Borrowing

- Abstract -

JEL H-74

Considering the situation of Hungarian local governments, borrowing and indebtedness regulation must be transformed by making reform decisions in multiple interrelated fields, which may be summarised as follows. 1. Modernisation of information management systems. Steps must be made to apply a maturity-based view which means taking into account off-balance sheet liabilities and guarantees. 2. Transformation of relations between central and local government. 3. Application of modern planning methods. Performance-based budgeting must be gradually adopted. 4. Switch to treasury system. 5. More consistent application of Debt Settlement Act. 6. Eliminating possibility of operating deficit. 7. Regulation of local government borrowing. 8. Local government credit guarantee. 9. Strengthening financial control. External financial control must ensure that the closing reports of each local government are validated annually.

Péter Halmosi, PhD, assistant professor (University of Szeged)

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