The Law Regulations of Individual Debt Ratio in the Time of the COVID-19 Pandemic

Abstract

The new rules governing debt limits were introduced in 2014 (Articles 242–244 of the Act on Public Finance) and immediately became a major difficulty in planning and managing local finances in territorial self-government units. The next four years proved many defects and inconveniences in implementing new norms, while “creativity” of the financial sector of local authority units demonstrated that they were quite easy to evade. The structure of the maximum ratio limiting obligations due to titles specified by the lawmaker, due in a particular year, is closely related to the provisions of the Act on Public Finance. For the first time it was used in evaluating the budgets passed for 2014. The essence of this legal regulation consists in comparing two ratios, presented in form of an equation (formula). In order to pass the budget local authorities need to obtain a relation in which the left side of the formula (annual debt repayment ratio) is lower than or equal to the right side (maximum debt repayment ratio). The ratio of the annual repayment ratio to the maximum repayment ratio (the debt repayment ratio) is presented in the debt forecast, which constitutes part of Long-Term Financial Forecast (LFF). This is justified by the requirement derived from APF that the board of a territorial self-government unit simultaneously present the draft of the budget and the draft of the resolution on LFF, and then both these documents are passed simultaneously.