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Executive Yuan approves amendment allowing local governments more debt

The Executive Yuan yesterday approved draft amendments to the Public Debt Law (公債法), which would allow local governments to borrow more money to ease their financial woes.

If approved by the legislature, the nation's 23 counties and cities -- excluding the two special municipalities of Taipei and Kaohsiung -- will be able to borrow an additional NT$150 billion a year.

While the change would raise the local governments' debt ceiling by 1 percent, that of the central government would remain unchanged. The Ministry of Finance had originally proposed to decrease the central government's debt cap by 1 percent.

According to the Public Debt Law, the combined cumulative debt of central and local governments should not exceed 48 percent of the previous three years' average GNP.

Of the 48 percent, the debt ceiling of the central government accounts for 40 percent, counties and cities 2 percent, the two municipalities 5.4 percent and townships and towns 0.6 percent.

Under the new formula, the total debt cap would increase to 49 percent, as that of counties and cities would increase to 3 percent.

According to Cabinet Spokesman Lin Chia-lung (林佳龍), the change was prompted by the deteriorating financial positions of local governments.

"While counties and cities have incurred debts of over NT$168 billion this year, they plan to borrow NT$66 billion more next year, or about NT$35 billion more than the amount they're allowed to borrow," Lin said.

Although local governments would be allowed to borrow more, Premier Yu Shyi-kun said that it is not the best way for them to solve their financial problems.

"Local governments still have to make efforts to cut down on their expenses and look for more sources of income," Yu said.

Yu yesterday instructed Minister without Portfolio Hu Shan-jen (胡勝正) to form a task force to formulate measures to deal with local governments' financial problems and present a proposal by the end of the year.

The draft would also increase their allowable debts of less than a year old by 10 percent from the original 30 percent, to 40 percent of their annual expenditure.
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