Contents - Preface - Acknowledgments
Abbreviations and Acronyms
Executive Summary
Chapter 1 Introduction -1
I Political, Legal, and Financial Framework
John Petersen and Mila Freire -9
Chapter 2 Fiscal Devolution -11
Chapter 3 Market Setting and Legal Framework -29
II Borrowing Instruments and Restrictions
on Their Use
John Petersen and Miguel Valadez -47
Chapter 4 Subnational Governments as Borrowers -49
Chapter 5 The Nature and Design of Debt -63
Chapter 6 Debt Instruments and Methods of Sale -77
Chapter 7 Restrictions on the Issuance and Use of
Subsovereign Debt -87
III Characteristics of Financial Market
Regulation and Disclosure
John Petersen -111
Chapter 8 Financial Market Structure, Regulation,
and Operations -113
Chapter 9 Disclosure and Financial
Reporting -129
IV Evaluating, Monitoring, and Assisting
Subnational Governments
John Petersen and Marcela Huertas -139
Chapter 10 Credit Analysis and Credit Ratings -141
Chapter 11 Monitoring and Intervening in
Subnational Government Finances -155
Chapter 12 Designing and Implementing Credit
Assistance to Subnational Governments -173
V Policy Guidelines
John Petersen and Mila Freire -203
Chapter 13 Concluding Observations and
Policy Guides -205
VI Country Case Studies -217
Latin America and the Caribbean
Chapter 14 Argentina
Rodrigo Trelles Zabala -219
Chapter 15 Brazil
Rodrigo Trelles Zabala and Giovanni Giovanelli -261
Chapter 16 Colombia
Rodrigo Trelles Zabala -279
Chapter 17 Mexico
Steven Hochman and Miguel Valadez -299
Sub-Saharan Africa
Chapter 18 South Africa
Matthew Glasser and Roland White -313
Chapter 19 Zimbabwe
Roland White and Matthew Glaser -337
Middle East and North Africa
Chapter 20 Morocco
Samir El Daher -355
Chapter 21 Tunisia
Samir El Daher -365
Asia
Chapter 22 People’s Republic of China
John Petersen -375
Chapter 23 Republic of Korea
John Petersen -399
Chapter 24 India
Pryianka Sood -413
Chapter 25 Indonesia
Robert Kehew and John Petersen -443
Chapter 26 The Philippines
John Petersen -461
Eastern and Central Europe
Chapter 27 Bulgaria
Peter D. Ellis and Kremena Ionkova -487
Chapter 28 Czech Republic
João C. Oliveira and Jorge Martinez-Vazquez -503
Chapter 29 Hungary
Pryianka Sood -525
Chapter 30 Poland
Miguel Valadez and John Petersen -545
Chapter 31 Russian Federation
Asad Alam, Stepan Titov, John Petersen -571
Bibliography
Index
Boxes
2.1. Devolving Responsibility for Elementary
School Teachers’ Salaries in Romania
2.2. Rio and the International Marketplace
3.1. Banks and Securities Markets: Are Both
Needed for Development?
3.2. Brazilian Banks’ Excessive Concentration in
Government Securities
4.1. Defining and Controlling Public Debt
4.2. China: Off-Budget Finance and the
Transmuted Bond
4.3. Restructuring Subnational Government:
From Few to Many (But How Many?)
5.1. Importance of the Rate-Setting Pledge
5.2. Intergovernmental Transfer Payments
as Collateral
5.3. Importance of Feasibility Reports: The San
Pedro Sula, Honduras, Sports Complex
6.1. Selecting an Underwriter through
Competitive Negotiation
6.2. Rigging a City’s Bond Sale
7.1. The Philippines: How Political Risks Can
Inhibit Municipal Credit Markets
7.2. Examples of Language on the Binding
Nature of Financial Obligations
7.3. The City of Cebu in the Philippines
7.4. Johannesburg Comes Up Short
7.5. Example of Language Denying Central
Government Responsibility for
Municipal Debt
7.6. Example of Language on Securing Debt
with Own Revenues
8.1. Commercial Banking in Transitioning
Economies
8.2. The Bank for International Settlements’
Reserve Requirements and Capital Rules
8.3. What Is a Security?
Considers a Deal
8.4. After 60 Years, Municipal Bonds Return
to Romania
9.1. Disclosure over the Internet
9.2. Accounting for Accounting Differences
9.3 Why Did Czech Municipal Debt Grow
So Fast?
10.1. Emerging Market Ratings and Bond
Insurance
11.1. Example of Information Provided in the
Debt Annex of French Subnational
Government Budgets
11.2. In Argentina Trustees Make a Difference
11.3. Debt Adjustment and Subnational
Insolvency in Hungary
11.4. Financial Stabilization to Address Subnational
Bankruptcy in Latvia
12.1. The Subnational Government Retreat from
the Private Credit Market in
the Czech Republic
12.2. Moving from Soft to Hard Credit through
Enforcement of Loan Collections:
South Africa’s Experience
12.3. The Philippine Local Government Unit
Guarantee Corporation
12.4. The Tamil Nadu Urban Development Fund,
India
12.5. Assisting Small Bond Issuers: The Bond Bank
Option
12.6. A Brief Illustration of Grant-Loan Integration:
An Example from Indonesia
18.1. A South African Parable
24.1. Recent Projects Financed by the Tamil Nadu
Urban Development Fund
24.2. Basis for the AA+ Rating of the Madurai
Municipal Corporation Bond Issue
Figures
3.1. Market Structures and Sources of Capital for
Local Government Borrowing
3.2. Stages of Development in Credit
Market Access
4.1. General Government Obligation
4.2. Government Limited Obligation
4.3. Public-Private Project Financing
4.4. Matrix of Subnational Government
Financing Capacity
6.1. Debt Service Structures
12.1. Retail On-Lending by the Government
Financing Institution
12.2. Wholesale On-Lending by the Government
Finance Institution
12.3. Securitization of a Loan Pool
12.4. Mechanics of a Liquidity Facility
14.1. Distribution of Shareable Taxes under the
Coparticipation Scheme, Argentina
14.2. Relative Fiscal and Debt Situations of
Provinces, Argentina, 2001
14.3. Provincial Indebtedness by Type of Debt or
Lender, Argentina, December 2001
14.4. Impact of the Devaluation on Provincial
Debt, Argentina
14.5. Disbursement of Coparticipation Revenues,
Argentina
14.6. Provincial Bond Debt Outstanding by Type,
Argentina, End of 2001
14.7. Flow of Funds for the Salta Hydrocarbon
Royalty Trust Bonds
14.8. Selected Debt Indicators, Salta and All
Provinces, End-2001
14.9. Selected Debt Indicators, City of Buenos
Aires and All Provinces, End-2001
14.10. Selected Debt Indicators, Buenos Aires and
All Provinces, End-2001
15.1. Distribution of the Debt Stock in Bonds by
State, Brazil, End-1996
15.2. Subnational Debt as a Share of GDP, Brazil,
1998–2002
16.1. Fiscal Balance as a Share of Total Revenue
by Department, Colombia, 2000
16.2. Direct Subnational Debt, Colombia,
1996–2001
16.3 Allocation of Credit from Findeter
1989–99
16.4. Debt Stock, Capital District of Santa Fe
de Bogotá, 1995–2001
17.1. Borrowing by Three State Governments,
Mexico, 1994–98
18.1. Outstanding Municipal Debt, South Africa,
1997–2000
18.2. Outstanding Municipal Debt by Form,
South Africa, 1997–2000
22.1. Typical Cooperative Joint Venture
Arrangement for Expressway Development
24.1. Funding Approvals and Disbursements by
the Tamil Nadu Urban Development Fund
by Sector, as of 31 March 1999
24.2. Value of Capital Works Executed by
Municipalities with Funding from the Tamil
Nadu Urban Development Fund,
1993/94 to 1998/99
24.3. Simplified Flow of Funds in the Pooled
Financing Scheme
27.1. Local Government Expenditure as a Share
of GDP, Selected Countries, Various Years,
1998–2002
28.1. Municipal Debt Outstanding,
Czech Republic, 1993–99
28.2. Local Fiscal Deficits, Czech Republic,
1993–2000
28.3. Composition of Municipal Debt
Outstanding, Czech Republic, 1993–99
28.4. Average Composition of Municipal Debt
Outstanding, Czech Republic, 1998–99
29.1. Sources of Local Government Revenue,
Hungary, 1995–2000
30.1. Own-Source Revenue as a Share of Total
Revenue, Szczecin, 1998–2002
30.2. Local Government Debt by Source, Poland,
1999–2001
30.3. Concepts of Surplus from Operating
Revenues as a Source of Funds for
Capital Spending
30.4. Structure of Operating Revenue, Wroclaw,
2001
30.5. Budget and Debt, Wroclaw, 1996–2002
30.6. Structure of Operating Expenditure, Lodz,
2001
30.7. Budget and Debt, Lodz, 1996–2002
30.8. Debt Burden as a Share of Operating
Revenue, Lodz, 1996–2002
30.9. Budget Balance and Debt, Szczecin,
1998–2002
30.10. Debt and Debt Service as a Share of
Operating Revenue, Szczecin, 1996–2002
30.11. Budget and Debt, Krakow, 1998–2002
31.1. Administrative Structure for Executing the
Debt Strategy, St. Petersburg
Tables
7.1. Municipal Debt Limitations in Selected
Eastern and Central European Countries
10.1. Credit Rating Volatility in Asia: Selected
Standard and Poor’s Long-Term Foreign
Currency Sovereign Ratings
14.1. Allocation of Responsibilities among Levels
of Government, Argentina
14.2. Terms and Conditions of the Typical
Consolidation Bond, Argentina
14.3. Provincial Bond Issues in Domestic and
International Capital Markets, Argentina,
1994–2001
14.4. Features of the Bond Issue by the Salta
Hydrocarbon Royalty Trust
14.5. Debt by Source, Salta, 1995–2001
14.6. Key Features of the Bond Program of the
City of Buenos Aires
14.7. Main Characteristics of the Bond Issues by the
City of Buenos Aires
14.8. Debt by Source, City of Buenos Aires,
1995–2001
14.9. Access to the Bond Market by the Province of
Buenos Aires, 1994–2001
14.10. Debt by Source, Province of Buenos Aires,
1995–2001
15.1. Municipal Sources of Funds, Brazil, 1999
16.1. The “Traffic Light” System for Regulating
Subnational Borrowing, Colombia
16.2. Potential Borrowers from Findeter
16.3. Terms and Conditions of Findeter Loans
16.4. Features of the Bond Issue by the Capital
District of Santa Fe de Bogotá
16.5. Revenues and Expenditures, Capital District
of Santa Fe de Bogotá, 1995–2001
16.5. Debt Service, Capital District of Santa Fe
de Bogotá, 1995–2001
17.1. Spending and Own-Source Revenues as a
Share of GDP by Level of Government,
Mexico, Selected Years, 1991–97
17.2. Subnational Bond Issues, Mexico, 2002
19.1. Assets of Deposit-Taking Institutions,
Zimbabwe, 1992–97
19.2. Local Government Revenues by Source,
Zimbabwe, 1995–98
19.3. Gross Public Debt of Local Authorities,
Zimbabwe, 1994–97
19.4. Bond Issues by Local Governments,
Zimbabwe, 1990–2001
22.1. Subnational Revenues and Expenditures,
1993 to 2001
22.3. Market Capitalization, Bonds, and Domestic
Bank Credit as Percentages of GDP:
1995–2000
22.4. Outstanding Domestic Bonds and Issuance
in 2001
23.1. Debt and Capital Spending of the Seoul
Metropolitan Government, Republic of Korea,
Fiscal Years 1996–2001
24.1. Third Tier of Government, India, 2000
24.2. Fiscal Decentralization, India, 1997/98
24.3. Finances of Local Bodies, India, 1990/91 and
1997/98
24.4. Terms of the Bond Issue by the Ahmedabad
Municipal Corporation
24.5. Estimated Gap in Urban Infrastructure
Financing, Tamil Nadu, 2002
24.6. Infrastructure Investment Requirements by
Type of Urban Local Body and Sector,
Tamil Nadu, 1996–2001
24.7. Lending Terms of the Tamil Nadu Urban
Development Fund since 1998/99
24.8. Terms of the Bond Issue by the Madurai
Municipal Corporation
24.9. Financial Indicators for the Tamil Nadu Urban
Development Fund as of March 2002
24.10. Terms of Issue of the Water and Sanitation
Pooled Fund
25.1. Central Government Lending to Local
Governments, Indonesia, Selected Years,
1980–99
25.2. Banking Sector Assets by Type of Bank,
Indonesia, End of March 2001
26.1. Local Government Loans and Deposits with
Selected Financial Institutions, Philippines,
2000
27.1. Financial Performance Indicators for Sofia,
1996–2001
27.2. Credit Ratings of Selected Local
Governments, 2001
28.1. Public Debt Outstanding, Czech Republic,
1993–99
28.2. Municipal Bonds Issued, Czech Republic,
1992–99
29.1. Equity and Debt Markets, Selected Countries
in Central and Eastern Europe, End-1995
29.2. Terms of the Bond Issue by the Municipality
of Budapest
29.3. Terms of the Bond Issue by the Municipality
of Pecs
30.1. Current Structure of Subnational
Government, Poland
31.1. Standard & Poor’s Credit Ratings of
Subnational Borrowers, Russian Federation,
1997–2002
31.2. Debt by Type, St. Petersburg, 1994–2001
31.3. Structure of Debt, St. Petersburg, 1994–2001
31.4. Debt Indicators, St. Petersburg, 1997–2001
31.5. Credit Ratings, St. Petersburg, 1998–2002
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