Municipalities must follow strict fiscal discipline, state secretary says

Municipalities will not be allowed to plan for deficits in their budgets or take decisions independently to take out loans, National Economy Ministry State Secretary Zoltan Csefalvay said on Thursday.

Municipalities will have to exercise strict fiscal discipline, Mr Csefalvay emphasised.

"The high level of government debt, Hungary’s exposure to external markets and the debt level of municipalities all show that the indebtedness must be stopped somewhere," the state secretary said.

Mr Csefalvay said borrowing by municipalities must be tied to central, ministerial permission. He noted that last year’s central budget deficit was targeted at 3.8%, but still came to 4.2% at the end of the year. This was due to a large extent to municipal debt, he said.

Local councils will be allowed to issue debt, with the exception of short-term loans, only with an advance approval of the government from next year under the bill on financial stability before parliament.

The state secretary said he was unable to give details as the issue of central control of municipal borrowing and the ban on budgetary planning with deficit will be regulated in the municipalities act still being drawn up.