Abstract
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The general fiscal profile of local governments, its trends comparing with unitary EU countries and the existing problems
According to the statistics of the local revenue and spending there was an expanding gap between the revenue and expenditure at local levels, systematic subsidies and transfer payments from the central government. This phenomenon is partly due to the asymmetry between fiscal power and spending responsibilities defining. Ukrainian local governments have low level of financial autonomy, weak own revenue base, luck of basic financial instruments as municipal borrowing. At the present, the major financing channels of local governments include borrowing from the international financial institutions and issuing projects bonds through special entities to raise construction funds. However, the amount of foreign debts arranged by the central government is too limited to satisfy the huge financial demand of regional economic development.
Statistics: share of revenues and expenditures of local budgets in GDP, share of local taxes in GDP, share of grants in total revenues of local budgets, indexes of revenue structure.
Case study: summarizes the experiences of main Ukrainian cities in internal and foreign municipal borrowing 1994–2005 and evaluates results of using local financial management (debt management). Examination of the few long-term borrowings (both bank loans and bonds) will reveal how debt is secured and repayment assured, how funds are used, and what risks market players cover. Such an examination will reveal how existing restrictive regulations are used in practice, and will suggest reforms to the existing legal and regulatory framework to attract more private capital into the municipal sector. Local governments are acting essentially as budgetary agencies. Under these circumstances, accounting and budgetary practices do not capture the need for separate capital budgeting, and the realities of delivering mandatory services.
Theory of local financial management (debt management) suggested an assessment to the various financing channels and methods of local governments to overcome the impediments to bond financing. Most EU countries apply some form of restrictions to local government budgeting and borrowing, but in various forms and to varying degrees. These restrictions are considered necessary components of a fiscal federalism involving some sort of central government control in local affairs, a design which can be termed "administrative federalism. The ultimate aim is to understand how mechanisms of fiscal discipline is established and function, what is key issues including local budgetary policy-making, the policy effects of local budget deficits and public debt, the rules of amortization and debt instalment, whether extensive fiscal controls promote budget accountability and discipline, and how the Maastricht criteria concerning deficit and debt can be implemented. In EU countries decentralised public entities are responsible for undertaking various infrastructure investments required to meet basic needs at the local level, including utilities, transportation, health, education and environmental protection. To meet their funding needs, these decentralised entities, access subnational bond markets. In policy area mainly the different institutional arrangements in place should be concerning as the strategic and operational autonomy of local governments, the role of central government in coordinating access to capital markets by sub-national governments should be changed.
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