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23rd September 2021, Skopje – Municipalities will be given the possibility for financial consolidation via 10-year structural bond, to be issued by the Ministry of Finance. This is one of the three instruments the municipalities will have at their disposal in case of financial instability, being also governed under the Draft Law on Modifications and Amendments to the Law on Financing Local Government Units, prepared by the Ministry of Finance and adopted by the Government. Additionally, unlike before, in case of financial instability, the Mayor will be obliged to prepare a Draft Plan of Measures aimed at Overcoming Financial Instability, as pointed out by Minister of Finance, Fatmir Besimi, at a press conference, wherein the Law was promoted as part of the fiscal decentralization reform. Ministry of Finance has been working on this reform since the beginning of the year.

“First instrument – stand-by credit will be issued by Ministry of Finance, covering a period of up to 10 years. Second instrument is an interest-free municipal bond with a 10-year maturity period. Interest-free municipal bond will be issued upon adopting act on approval of the securities issuance by the Securities and Exchange Commission. Third instrument – structural bond will be issued by the Ministry of Finance upon request by the municipality”, as pointed out by Minister of Finance, Fatmir Besimi.

For the purpose of using one of the instruments, the municipalities will submit a request to the Ministry of Finance based on the Plan of Measures aimed at Overcoming Financial Instability. Request will contain data on the necessary amount of funds and the possibility to use one of the instruments.

Unlike the so-far obligation for declaring financial instability by the Mayor, a precondition for initiating financial instability-related procedure in the municipality, and in line with the proposed amendments to the Law, financial instability is declared by force of law on the day of determining one of the criteria prescribed in the Law, without waiting for the Mayor’s decision thereupon.

Immediately upon the onset of financial instability, the Municipal Council, upon proposal by the Mayor, adopts a Plan of Measures aimed at Overcoming Financial Instability. Measures cover restrictions of the mayor regarding the use of municipal funds on various grounds, all to the end of rationally using the funds and overcoming the financial instability. Plan is transparently published on the website of the municipalities for the purpose of getting the wider public familiar therewith. Ministry of Finance will follow the implementation of the measures under the Plan.

As part of the fiscal decentralization reform, and to the end of strengthening the financial discipline of municipalities, arrears repayment and cost-effective operations, measures have been envisaged for planning the actual revenues and expenditures of the municipalities, rationalizing the operations and reducing the unnecessary expenditures, regular servicing of arrears, strengthened financial discipline, procedures on declaring financial instability, issuing municipal bonds and analysis of the existing arrears of both the municipalities and the public enterprises.

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