Cabinet unveils debt ceiling adjustment

HOSTILE RECEPTION::Hau Lung-bin is scheduled to attend a press conference today to express ‘strong dissatisfaction’ with the Cabinet’s ‘unacceptable’ amendment

By Shih Hsiu-chuan  /  Staff reporter

Fri, Nov 23, 2012 - Page 3

The Cabinet yesterday proposed adjustments to the debt ceilings of local governments to allow New Taipei City (新北市), Greater -Taichung, Greater Tainan and Greater Kaohsiung to take out more loans in response to their growing financial needs after they were either upgraded or merged to create a municipality about two years ago.

The Ministry of Finance said New Taipei City is expected to see an estimated increase of NT$49.8 billion (US$1.7 billion) in its loan capability, Greater Taichung NT$52.9 billion, Greater Tainan NT$45.4 billion and Greater Kaohsiung NT$23 billion, with Taipei seeing a decrease of NT$183.7 billion.

If the adjustments are passed, Taipei would be able to borrow a maximum of NT$85.5 billion, New Taipei City NT$66.6 billion, Greater Taichung NT$59.2 billion, Greater Tainan NT$46.8 billion and Greater Kaohsiung NT$59.1 billion, the ministry said.

The national debt ceiling remains the same under the proposed amendment to the Public Debt Act (公共債務法), despite using a different method of calculating debt limits.

Currently, total public debt at all levels of government must not exceed 48 percent of the average GDP of the previous three years. Under the amendment, the ceiling would be capped at 50 percent of the previous three years’ average GDP.

“Every municipal city has its own concerns. There is no way to please everyone. The Executive Yuan’s amendment was the best version, on balance,” Premier Sean Chen (陳冲) was quoted by Executive Yuan spokesperson Cheng Li-wen (鄭麗文) as saying when the Cabinet revealed the amendment at a press conference.

Of the current 48 percent debt ceiling, the central government is capped at 40 percent, Taipei at 3.6 percent and Greater Kaohsiung at 1.8 percent, 23 counties and cities at 2 percent, and villages and townships at 0.6 percent.

If the amendment passes the legislature, the central government would have a limit of 41.2 percent, the five municipalities, along with Taoyuan County, expected to be upgraded to a municipality in 2014 at the earliest, 7.25 percent, 16 counties and cities 1.43 percent, and villages and townships 0.12 percent.

“Discussions over the amendment were fierce as we [Cabinet officials] engaged in three rounds of back-and-forth debates with representatives of the five municipalities,” Vice Minister of Finance William Tseng (曾銘宗) said.

Tseng said the simplest way to relieve the financial strain for governments at all levels would have been to raise the debt ceiling, but it was not a responsible way to deal with the problem at a time when the US and the eurozone are experiencing debt crises.

Taipei Mayor Hau Lung-bin (郝龍斌) is scheduled to attend a press conference with Chinese Nationalist Party (KMT) lawmakers from the city today to express their “strong dissatisfaction” with the “unacceptable” amendment, KMT Legislator Alex Tsai (蔡正元) said.

At the Cabinet meeting, Greater Taichung Deputy Mayor Shyu Jong-shyong (徐中雄) said the city government was “disappointed and indignant” at the proposal.

The Greater Kaohsiung Government said that the proposal would result in a reduction of NT$13.7 billion of its loan capability rather than an increase of NT$23 billion as the ministry has estimated.