The Ministry of Finance confirmed yesterday it is considering revising the Public Debt Law (公共債務法) to pave the way for funnelling more money to city and county governments.
The ministry declined to elaborate details regarding the planned amendments.
The ministry was responding to a Chinese-language newspaper report that the government plans to raise the cap on city and county governments' combined outstanding debts from the current 2 percent to 3 percent of the nation's average annual GNP for the past three years.
The existing Public Debt Law imposes some restrictions on local governments' fund-raising activities, including that the annual debt a city or county government is eligible to borrow should not surpass 15 percent of its annual expenditure and that its accumulated outstanding loans must fall below 45 percent of its annual spending.
Moreover, the law stipulates that the aggregate outstanding debts of all city and county governments must not exceed 2 percent of the nation's average annual GNP for the past three years.
By the end of this year, the total debts incurred by the nation's 23 city and county governments will reach more than NT$167 billion, only NT$35 billion below the legal ceiling.
Liu Teng-cheng (劉登城), director of the ministry's department of National Treasury, said most local cities and counties have some sort of financial problems.
In view of the approaching of their accumulated debts to the legal cap, the ministry is studying the feasibility of easing their fund-raising restrictions, Liu said.
But he added that the ministry has yet to finalize a comprehensive adjustment plan.
"We may not necessarily raise the limit to 3 percent of the nation's annual GNP," Liu said.
Under the terms of the current law, the cumulative debts of governments at all levels ought not to surpass 48 percent of the nation's average annual GNP for the past three years, with the central government given the lion's share of 40 percent; the Taipei City Government, 3.6 percent; the Kaohsiung City Government, 1.8 percent; other city and county governments, 2 percent; and township governments, 0.6 percent.
Liu said the ministry may adjust the eligible borrowing ratios for various levels of governments to allow city and county governments to borrow more money while keeping the 48 percent cap unchanged.
At the moment, cumulative debts of township governments account for only 0.1 percent of the nation's GNP, compared to Taipei's 1.7 percent and Kaohsiung's 0.8 percent. Taipei and Kaohsiung are special municipalities under the direct jurisdiction of the Executive Yuan.
According to Yu Tzong-shian (于宗先), a member of the Academia Sinica, the government debt will be at least NT$3.3 trillion by the end of this year.
Yu said the central government has currently accumulated a debt of NT$3.1843 trillion.
"If we add debt from local governments and other obligations from non-operating funds, the total debt of various levels of government is already NT$4.3064 trillion," Yu said.
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