Municipal capital spending and debt in Czech Republic
The paper deals with the contemporary issue of municipal finance. Municipalities in Czech Republic make up important part of public sector and influence the fiscal performance of Czech economy. Simultaneously, the capital expenditure of municipalities has a crucial role in shaping of the entrepreneu...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Mendel University Press
2005-01-01
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| Series: | Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis |
| Subjects: | |
| Online Access: | https://acta.mendelu.cz/53/3/0059/ |
| Summary: | The paper deals with the contemporary issue of municipal finance. Municipalities in Czech Republic make up important part of public sector and influence the fiscal performance of Czech economy. Simultaneously, the capital expenditure of municipalities has a crucial role in shaping of the entrepreneurial environment and of an environment in the widest sense. The goal of this paper was to analyse the capital expenditure of municipalities in Czech Republic from the national economy point of view and to analyse the financing of capital expenditure between 1994 and 2003. The emphasis was given to the relation between the capital expenditure and the indebtedness of municipalities. The analysis reveals that the capital expenditure make significant share of overall public capital expenditure, the share exceeds 50%. The capital expenditure of municipalities also participate considerably on gross fixed capital formation (10.57% in 2003) and therefore on GDP formation (2.83% in 2003). However, considering the economic cycle, capital expenditure of municipalities has pro-cyclical effect. Analysis the structure of financing of capital expenditure, the operating surplus is very important resource. However, it is not sufficient one even considered together with capital incomes and capital subsidies. It results in using loans to finance the capital expenditure. This happened between 1994 and 2003, with the exclusions of 1998 and 1999. Because of the future high need of capital expenditure, it can be expected that municipalities will employ even more loans. The link between capital expenditure and indebtedness of municipalities can be identified. There is another factor in effect. The volume of operating (especially tax) incomes is not sufficient. The state decentralizes significant portion of activities without providing municipalities with corresponding income. Municipalities then are not able to generate adequate operating surplus to finance the deficit on capital budget. Consequently, the rate of growth of capital expenditure of municipalities declines as well as the share of capital expenditure on overall municipal expenditure. |
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| ISSN: | 1211-8516 2464-8310 |