Borrowing Capacity of Macedonian Municipalities–Comparative Analysis with the Practices of EU and South-East European Countries
Acquiring capital for municipal development is essential for its growth and financial stability. Municipalities (depending on the degree of fiscal decentralization) have limited range of possibilities for acquiring capital. These possibilities are divided into two major groups (depending on the source of financing) i.e. external sources and own sources. External sources for acquiring capital and financial assets for the municipalities can be summarized to national government capital grants and grants from other government and non-governmental institutions. Internal sources for acquiring capital are local taxes, service charges and fees, accumulated cash savings, annual operating surpluses and borrowing. Borrowing as a form of financing depends on the fiscal capacity of the municipalities. As a fiscal capacity, immediate depends from the municipal own revenues, and most of them have low level of economic activities, a high level of unemployment and high level of migration, they are faced with a problem of obtaining funds for doing their legal competences and duties. Projecting the future revenues of the municipalities and discounting them to present value can also be the key remark into the determination of municipal borrowing capacity. The main goal of this article is to show the borrowing capacity of the municipalities of the Republic of Macedonia and to make a comparative analysis with some South-East-European and developed EU countries in order to make a consistent platform for comparison and revealing directions for sustainable development, taking into consideration other positive practices in regional development. Key Word: Borrowing, Borrowing Capacity, Municipalities, Public Financing, Debt Ratio.