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China Times: Miaoli is simply the first landmine

2015/07/14 19:22:57

The debt-ridden Miaoli County government has had to seek help from the central government because it was unable to pay salaries and pensions in July. This development has given rise to public concerns over possible bankruptcy of local governments.

The accumulated public debt with maturity of at least one year incurred by the Miaoli County government in 2014 accounted for 61.1 percent of the local administration's annual expenses, far higher than the 50 percent ceiling stipulated in the Public Debt Act.

Yilan County has an even higher debt ratio than Miaoli and is possibly next in line to fall into bankruptcy.

The debt problem reflects a lack of financial discipline among local governments. However, it was the central government that first started to sidestep the debt ceiling regulations.

In 2000, the then Democratic Progressive Party government decided to increase public spending to stimulate consumption and investment, amid a global Internet bubble crisis and an investment confidence crisis in Taiwan that resulted from a decision to halt construction of the country's fourth nuclear power plant.

At the time, the central government allocated special budgets so it could circumvent the debt ceiling regulations in the Public Debt Act and Budget Act. The money for the special budgets was obtained mainly from loans. In the absence of any plans to repay the public debt, the central government's finances worsened.

In 2000, the central government's debt with maturity of one year or more amounted to NT$2.5 trillion (US$80.48 billion). The figure has grown to NT$5.5 trillion in 2015, not including an invisible debt of NT$18 trillion, according to the Directorate-General of Budget, Accounting and Statistics.

We believe it is impossible for the government to pursue economic development through public construction projects in the absence of a healthy financial structure. Only by standing on solid financial ground can a government ride the waves of recession in an economic development circle.

The Taiwan government has an obligation to control its spending and think about how to increase revenue and better balance its budget. (Editorial abstract on July 14, 2015)

(By Elizabeth Hsu)