Legal Regulations and Local Government Loan Prospects in Ukraine: an Analysis

Abstract

The major problems of municipalities (especially small ones) are roads and bridges, the waste management infrastructure, the clean water infrastructure, sewage treatment facilities, the natural gas delivery infrastructure, electricity, public transit, etc. As a rule, municipal budgets don’t provide sufficient funds for solving these problems. Thus, the major sources of funding those specific needs are loans. According to the Budgetary Code of Ukraine (Article 16, Part 2) the following entities have the right to borrow: city councils (radas) and theVerkhovna Rada (Parliament) of the Autonomous Republic of Crimea (ARC). The Verkhovna Rada of the ARC and city councils have the right to receive internal loans (except in cases mentioned in Article 73 of the Budgetary Code of Ukraine); city councils of cities that have more than 800 thousand inhabitants (according to official records of government statistics at the time a decision about the loan is made) have the right to take outside loans. The Council of Ministers (Rada Ministriv) of the ARC, local state administrations, executive bodies of particular city councils may, subject to a decision by the Verkhovna Rada of the ARC or the proper city council, take out a loan from financial institutions to fund temporary budgetary gaps for a term not longer than three months within the time frame of the same budgetary period. The Ministry of Finances defines the manner of those loans. Budgets cannot make loans to each other (Article 73 of the Budgetary Code).