Local Government Bonds issuance procedures

A local government's draft budget must include its bond issuance plan, and require local assembly approval (Local Autonomy Law). The plan must include details on proposed bonds, including:

  • Purpose for which the bond is to be issued;
  • Maximum amount to be borrowed;
  • Manner of borrowing [usually through publicly offering bonds or deeds];
  • Maximum interest rate [determined by financial market conditions]; and
  • Method of repayment

The Comprehensive Decentralization Law was enacted in July 1999 to promote the further independence of Local Governments. The law also changed the bond issuance system to a consultative system, and Local Governments must now consult with the Ministry of Internal Affairs and Communications regarding issuance. The new system was introduced to ensure smooth issuance of bonds, guarantee local financial resources, and promote sound local finances.

The Ministry of Internal Affairs and Communications prepares the Local Government Bond Plan every year in line with the Ministry of Finance's Fiscal Investment and Loan Program Plan. The Plan includes estimates of bond issuances by type and purpose.