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Financing local development in the Polish emerging markets BISE’s experience

Financing local development in the Polish emerging markets BISE’s experience. Włodzimierz Grudziński Washington, October 2004. Local government structure. 3 levels of local government ( established in ): number of entities Gmina ( 1990 ) Powiat ( 1999 )

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Financing local development in the Polish emerging markets BISE’s experience

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  1. Financing local development in the Polish emerging markets BISE’s experience Włodzimierz Grudziński Washington, October 2004

  2. Local government structure • 3 levels of local government (established in): number of entities • Gmina (1990) • Powiat (1999) • Województwo (1999) • Structure of gminas by number of population: • Structure of powiat by number of population:

  3. Financial model of local government Characteristics of local government’s entities • Non bancrupting entities • Stable sources of the own revenue (taxes, fees, revenue from property) • Debts limits are as follows: • Costs of debt servicing =< 15% of the planned budget’s revenue (Y) • Amount of debt =< 60% of the realised revenue (at the end of the year) • Amount of debt =< 60% of the planned revenue per year (at the end of the quarter) • Total public debt (state and local) < 60% of the gross domestic product • Financial supervision by the regional auditing chambers (RIO): • Legal conformity supervision of the financial resolutions • Obligatory opinions of RIO concerning incurring debt

  4. Sources of local governments’ investments • Own revenue • Debt • Credits • Bonds • Allocations, subventions, grants • UE funds (regional development, transport, cross-border cooperation) • National Funds (environmental protection (NFOŚ), multipurposes (BGK)) • Third party agreements • Public-private partnership • Energy saving companies

  5. * 92,8% of entities are indebted

  6. Soft funds for local government entities *important part of the program is dedicated to state infrastructure (highways)

  7. BISE’s experience in financing of local projects (1990-2004) • Over 1100 financed projects ( 700 financed entities, 25% of BISE portofolio), • Longterm cooperation with : • World Bank - Bank of Council of Europe (CEB) • NIB - Polish national funds (NFOŚ, BGK) • Proven metodology of credit analysis oriented at every level of local government (ratio of default – 0,03%) • innovating solutions adapted to emerging needs and rapid changes on the local government’s market: • Quazi-currency credit with swap - Long term loans • Bridge-loans for UE funds - Municipal bonds • Special procedures for tenders concerning the environmental projects • Products tailored to emerging activities of local governments (e.i.ZOZ)

  8. * The average budget of local government entity financed by BISE is 4mln USD

  9. Future of local governments’ financial market- emerging needs • Long-term financing (>25 years): • Positive impact on reducing indebtness • Supplementary to the medium term UE funds • Solution for the self-financing local investments • Subordinated loans for special purpose companies • Development of public-private partnership projects

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