Finance Minister Zdravko Marić stated on Monday that starting from the beginning of next year, a new law on financing local government units will be implemented, and he emphasized that his focus until the end of this year is the refinancing of debts in the road sector.
Minister Marić said in the Croatian Radio show “Business Week” that the proposal for the new law on financing local and regional government units should soon be presented at a Government session, and it is expected to come into force on January 1, 2018. The aim of the new law, he said, is to simplify the system and strengthen the budgets of local government units.
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He reminded that this proposal was in public discussion for 40 days, during which constructive and good comments were received. Speaking about the legal solution itself, he stated that, in principle, all income from income tax goes to local and regional government units.
– Thus, the state, the central state will no longer see this income. We have retained that part of the equalization fund and must retain it considering the fact that even today there is a considerable difference in the economic, and then budgetary strength of certain cities, counties, and municipalities. This fund would actually level the difference in the degree of economic development to enable equal conditions for citizens regardless of whether they are in Zagreb, Slunj, Slavonski Brod, or on some island, as local government was entrusted with functional decentralization in terms of education, health, social services, and firefighting in 2003, the minister noted.
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The law aims to define the system of distribution of income from income tax in a simpler, more understandable, and fairer way, the system of fiscal equalization of local and regional government units, and the system of financing decentralized functions.
Additionally, the intention is to define a system that will ensure all local and regional government units the potential to provide a comparable level of public services, while regional development and demographic renewal will be encouraged within the framework of other legal regulations.
Refinancing debts in the road sector
Marić also stated that his focus until the end of the year is to refinance debts in the road sector, aiming to refinance and reprogram more than half of the current debt of 5.3 billion euros in that sector, which is fully included in Croatian public debt, supported by state guarantees.
Almost three-quarters of the debt, according to him, has already matured or is maturing soon, that is, this year or in the next two or three years.
– Thus, extending the maturity on one hand, and on the other hand, taking advantage of the situation in the markets to reduce the cost of that debt, said Marić.
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– As for the international market, as a baseline scenario, there is a possibility of issuing a bond, which would among other things be supported by a guarantee from the World Bank, however, this is still not fully defined, he emphasized.
He also mentioned that there is a part of the debt that he will not touch, as it is mostly from multilateral organizations such as the EIB and EBRD, which in terms of maturity and price is very satisfactory.
When asked whether the bond would be issued on the European or American market, Marić said that at this moment the European one might be closer.
