The local council of the city of Pecs has published a negotiated public procurement tender for a HUF 2.76 billion five-year loan.
The local council plans to raise the 60-month loan in a lump sum with a one-year grace period, with the balance on the council's budget account serving as coverage.
The city's 2011 budget has earmarked resources to open a HUF 7 billion current account overdraft, a HUF 1 billion investment loan and HUF 2.71 billion in short-term loans to bridge temporary financing problems.
The city of Pecs had outstanding debt of HUF 34.1 billion at the end of 2009 according to the State Audit Office's latest report.
Hungary's new constitution, taking effect next January, allows Parliament to pass legislation which would authorize the government to control the borrowing of local councils. In early April, the National Economy Ministry blamed the higher-than-expected HUF 247.7 billion cash-flow deficit of local councils for Hungary's failure to reach last year's 3.8%-of-GDP ESA deficit target.
Local council debt stood at HUF 1,462 billion at the end of 2010. PricewaterhouseCoopers (PwC) has recently projected the debt will grow HUF 370 billion this year.