In this article you will find information about debt consolidation program, Debt consolidators, debt free living

Debt consolidation program

However, the budget acts did not provide or allow for sufficient resources to fund the development tasks of local governments, especially for the own contributions required for EU develop ment grants. Between 2006 and 2010, HUF 388 billion in central budgetary appropriation were made available for development grants for local governments. HUF 185 billion in target ed and earmarked subsidies, HUF 55 billion in centralised appropriations, HUF 31 billion in chaptermanaged appropriations and HUF 117 billion in decentralised regional develop ment appropriations. The largely infrastruc tural development sources made available after the EU accession boosted investment at local governments. As, however, they did not have sufficient funds for their own contribu tion to the development grants, they took out loans and issued foreign exchange bonds to ensure this contribution – taking advantage of the opportunity provided by the government. As a result, the indebtedness of the local gov ernment subsystem of public finances, along with the decentralisation of its debt portfolio, began to increase further. On top of all this, the loans taken out, along with the EU grants, were mostly spent on infrastructural rather than productive investments. Therefore, there was no direct return, hence no coverage for the credit service generated from profits. Lo cal governments did not have sufficient for eign currency revenues for repayment either. With the 2008 crisis, the financial instability of the local government subsystem – due to the higher exchange rate risk – affected the whole of public finances.

After 2010, the debt issue, which damaged the fundamentals of the state’s operation, was at the centre of Hungarian financial policy. Al though the total debt of the local governments was insignificant compared to the amount of debt accumulated by the central government, by 2011 the audits of the State Audit Office of Hungary (SAO) proved that the local subsystem was extremely fragile in a financial sense.

Debt consolidators

Under previous governments, there was no coverage for the repayment of local government credits and debenture loans. The State Audit Office of Hungary focused most of its audit capacities on local governments in 2011. Act CLXXXIX of 2011 on Local Gov ernments relies on the findings of the SAO. These findings were incorporated into legisla tion, whereby the supreme audit institution contributed to good governance and the es tablishment of an efficient state. The SAO reports clearly showed that the financial equilibrium of Hungarian local governments deteriorated between 2007 and 2010, and financial risks increased over the same period.

Debt free living

The audit institution pointed out the reasons that lead to this situation. The lack of operating and accumulation funds emerged simultaneously in the local govern ment system. The exposure of local govern ments to banks increased, forcing them to renew and extend the amount set out in their liquidity loan contracts. The debt issue was truly serious challenge to meet because most of the local governments failed to create the reserves required to repay the liabilities to fi nancial institutions. The funds serving as cov erage for repayment were not identified. It was also risky that some of the property items that belonged to the nominal assets of local govern ments were also offered as security for loans. The SAO also warned that in the case of the issued bonds, beyond the unfavourable devel opments of the exchange rate, preterm recon version or conversion into Hungarian forints could also cause unexpected expenses. The increase in trade payables represented further risk. The provision of funds required by the subsequent financing of projects implemented with the help of EU grants also caused liquid ity problems. By the end of 2010, the local governments accumulated HUF 1154 billion in future commitments due to their invest ment projects in progress. In addition to the EU grants, domestic government grants and their own revenue, town local governments operating in the medium range needed an ad ditional HUF 217 billion in external funding. Giving up on investments was not an option either, as the infrastructure of local govern ments was outdated and, on the other hand, it was the investments implemented at the me dium level that gave momentum to the coun try’s performance, which was already in crisis struggling with falling GDP.