The Practice and Regulation of Municipal Loans and Bankruptcies in Hungary: The Challenges in 2011

Since municipal sector spending represents almost 14% of Hungarian GDP, imbalances in municipal finance have a measurable effect at the macroeconomic level. The Hungarian government did not limit municipal borrowing until 1995, but in the early years of the decentralization process municipal loan activity was insignificant. In 1996, a new act—the Municipal Bankruptcy Act—came into force. The ex ante rules set by the law were not always followed by municipal borrowers, and the market was also inefficient when assessing the credit bearing ability of municipalities. The current government is setting new rules on local borrowing. With the rare two-thirds majority in parliament, it has the chance to introduce long awaited reforms, although they are likely to be met by intense opposition at the local level. The presentation gives an overview together with an evaluation of the current state of proposed reforms.

SPEAKER

Dr. Izabella Barati-Stec is a visiting scholar at the Institute on Municipal Finance and Governance at the Munk School of Global Affairs, University of Toronto. She is Associate Professor in the Faculty of Economics at Corvinus University in Budapest, and has been on faculty since 2003. Her research includes municipal investment finance, municipal credit market participation, and resource and task allocation among levels of government. She has published numerous articles and made many presentations at international conferences, and has participated in projects of the World Bank, the Canadian Urban Institute, and the European Union. Izabella holds a Ph.D. in Economics from Corvinus University.

Co-sponsored by the Institute on Municipal Finance and Governance, Hungarian Studies, and the Centre for European, Russian, and Eurasian Studies (CERES), University of Toronto.