12.01.2016

A Bill Amending the Public Finance Law and the motives thereto have been released on the website of the Ministry of Finance. The proposed amendments thereto introduce an order of launching financial recovery procedures for municipalities and taking a number of measures aimed at achieving financial sustainability and stability of local finance.

They also define some conditions, the existence of which shows the extent to which the municipalities experience financial difficulties. Upon finding that three or more of the conditions are present, it is envisaged for the mayor of a municipality to advise the municipal council of the fact that the municipality experiences a financial difficulty and to propose to the municipal council that a financial recovery procedure should be launched. The municipal council is envisaged to issue a decision opening a financial recovery procedure, to entrust the mayor of the municipality with the task both to devise a recovery plan and to conduct public consultations with the local public. Following the public consultations, a decision of the municipal council determines the term of the financial recovery procedure (from one to three years) and adopts the financial recovery plan. The Bill envisages for the budget of municipalities with open financial recovery procedures to be agreed in advance with the minister of finance and to be considered by the municipal council together with the minister of finance's opinion. The provisional interest-free loans for the purposes of implementation of the financial recovery plan of municipalities are granted under terms and conditions set by the minister of finance with a period of recovery that may not exceed the period of the financial recovery procedure.

A financial recovery procedure will be launched by municipalities facing the risk of having unsecured liabilities, which, in turn, is related to an increase in their budget deficits. The need for financial recovery of municipalities experiencing financial difficulties is an expression of the efforts to confine the adverse impacts on the budget stance and on the local community by offering possibilities for implementation of additional revenue and expenditure measures upon taking account of the risks for growing arrears.

The Bill also proposes some other amendments that elucidate and answer some issues on the application of certain provisions raised during the effect of the Public Finance Law.