The Reason And Risk Analysis Of The Local Government Debt

Local government debt has been one of our local government problems demanding prompt solution. State’s Budget Law and other regulations clearly prohibits local governments’loan rising. However, in actual condition, to promote economy and protect local people’s livelihood, in the case of lack of financial funds, debt financing is prevalent. In the current situation, the Local Government Borrowing presents various channels, species and forms. Huge scale, high leverage ratio and overdue rate show that there exists great potential risk of Local governments debt, which must be actively prevent and resolved by taking effective measures.Against that background, this dissertation analyses the causes of the Local Government Debt, study its risk and propose the recommendations on how to improve debt management. It includes on the basis of Local government debt theory research, firstly, defining its meaning and classification, inquiry into the causes and necessity of the local government debts. Secondly, risk analysis on Local government debt, revealing its risk characteristics such as short-term liquidity risks, partial concentration risks, defines calculation methods and risk indexes such as debt service ratio and debt ratio, and determines the risk analysis content such as debt scale, debt structure. Thirdly, this dissertation designs the risk analysis model, endowing three levels of risk index interval, says the safety zone, the low risk area, the high risk area and conducts the empirical analysis combined with case study. This dissertation analyzes the risk situation and structure of government debts in the case, indicates the potential problems and risks in debt fund investment by risk indexes integration calculation, which provides the references for improving local government’s debt. Finally, this dissertation brings forward the measures and methods of sophisticating Local debt management on basis of Greek debt crisis and referential experience of debt management in the United States, Japan and the risk analysis model.