| Author |
| Abrahams, Mark, Francis Conway, Peter Tatian, Zdena Matouskova, | 1996 |
| and Jiri Mejstrik |
| Number of Pages: | 24 |
| Credit Finance Analysis: Handbook for Municipalities in Czech Republic |
Abstract |
| As part of the decentralization enacted in 1990, responsibility for municipal services, including developing and |
| operating local infrastructure in the Czech Republic has been delegated to local governments. The new tax and |
| intergovernmental finance system implemented in 1993, reinforced the trend toward greater local autonomy |
| and responsibility by giving municipalities a share of national tax revenues to spend and invest according to |
| decisions made entirely by local elected officials. These changes have increased the importance of making |
| sound financial decisions at the local level. |
| Faced with competing demands for scarce budget resources, municipalities have turned progressively to the |
| use of credit to finance priority projects. Loans offered on commercial terms by private banks are becoming |
| an important complement to more traditional state capital grants and subsidized loans. Learning how to make |
| prudent use of credit presents new challenges that require new analytical techniques. |
| This handbook documents an analytical methodology to assist municipal officials in making sound financial |
| management decisions regarding the use of credit to finance capital improvements. The methodology |
| addresses two basic questions: i) how much can a municipality borrow? And, How much should a municipality |
| borrow? |
| This Municipal Credit Finance Handbook was developed as part of the United States Agency for International |
| Development's Municipal Finance Program in the Czech Republic in a joint activity with the members of the |
| Finance Committee of the Union of Towns and Communities. The Handbook provides a method that Czech |
| municipalities can use to assess their debt carrying capacity by using financial indicators. The Handbook also |
| shows how to use a related computer model to apply the methodology to a specific municipality |