Analysis of Debt Limits in the Regional and Local Finance Bills

The present document is part of the Portuguese Public Finance Council’s set of contributions to improve the political decision-making process concerning the reform of the budget framework of local and regional public subsectors. It focuses on the debt rule put forward by the subnational finance bills being discussed by the Parliament in 2013 (Bill No. 121/XII, on the Autonomous Regions Finance Law, and Bill No. 122/XII/2.ª, on the Local Finance Law). The paper gathers and reconciles information from various sources on the magnitude of the current subnational debt and runs a series of numerical simulation exercises. With its release, CFP offers the public an analysis of the impact of the debt limits under parliamentary discussion on the general government gross debt. Within the limitations of a retroactive application exercise, it points out the position each territory would have had in the 2009-2011 period in face of the numerical target defined in the bill. It also includes an exercise that evaluates the room available for the remaining public subsectors, under the 60% of GDP cap set in European legislation, in case regions and municipalities exhaust their legal indebtedness capacity defined in Bills 121 and 122.