Local Govt Finances Under Renewed Pressure

 Due to economic slowdown, sluggish recovery, local fiscal revenue was severely affected, the income pressure arrived earlier than employment. Ministry of Finance data released in 2015, the national general public budget revenue grew 8.4%, after deducting 11 types of government transfer funds, income increased by only 5.8%, down 2.8 percentage points from 2014, the lowest since 1988.

The local level in the general public budget revenue slowdown more pronounced, with the diameter increased by only 4.8%, down 5.1 percentage points from 2014. Statistics of 31 provinces' 2015 revenue situation found that compared with 2014, the country has 24 provinces fiscal revenue growth to fall, 16 provinces flat or negative growth, an increase of 4 over 2014. There are 11 provinces in the final fiscal year revenue growth failed to achieve budget targets. Liaoning, Heilongjiang, Shanxi provinces negative revenue growth, Liaoning Province, in 2015 the general public budget revenues decreased 33.4%, fiscal revenue contradictions particularly grim.
Govt revenue is falling and budgets are tightening, but counter-cyclical spending is needed:
 Two sessions of information from the provincial perspective, in 2016 the vast majority of the provinces choose to continue to lower expectations, mostly concentrated between 6% -8%, lower than the GDP growth target from 0.5 to 2 percentage points. On the one hand, the uncertain economic situation will affect the local fiscal revenue; on the other hand, in the period of economic downturn, fiscal adjustment needs to play a counter-cyclical effect, reduce costs to reduce the tax burden on enterprises, conservation tax sources.

Reduction has become a reality, in order to ease the financial balance of payments gap, local governments have started to tighten their belts, control general expenditures scale, compressed "Three" funds, give priority to people's livelihood expenditure and key projects.

.....The key is to make up for the deficit to expand revenue and expenditure gap. 2016 active fiscal policy to intensify, the central economic work conference "stepwise increase the deficit rate," as to whether the current international break 3% of the cordon argument more if the deficit ratio exceeded 3% and a final distribution to local new general bond amount will also be expanded.

2015 national budget deficit 1.62 trillion yuan, of which 1.12 trillion yuan in central government deficit, 500 billion yuan local government deficits, while adding special local government bonds 100 billion yuan. Revenue and expenditure from the actual operation, the final deficit will be higher than the rate of 2.3% is expected in early. Many scholars believe that, from the current variety of situations, this year the deficit ratio exceeded 3% probability of a lot. Because of the special bonds from local deficit constraint, is theoretically in a positive financial background, this place special new debt is likely to continue to expand the scale.

In addition, local government debt risk in the financial pressure of the environment can not be ignored. To defuse debt risks, just after New Year's Day, 2016 local government debt limit has been passed on to local replacement. Replacement debt limit was increased more than last year. 2015 has 3.1 trillion yuan of local government debt maturity, the Treasury issued a final 3.2 trillion replacement bonds. 2016 2.8 trillion yuan, higher than last year replaced the debt limit, which means that you can advance replacement outstanding debt.
Caixin: 地方财政承压

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