Number of municipalities with risky finance management hits 11-year high

Prague, Sept 3 (CTK) - Eighty-four of the total 6,246 municipalities in the Czech Republic showed risks in the management of their finances at end-2011, the highest number in the past 11 years, according to a study made public yesterday by agency CEKIA.

The management of municipal finances shows the highest risks in the Zlinsky region (southern Moravia), Pardubicky region (eastern Bohemia) and Karlovarsky region (western Bohemia). In contrast, the state of municipal finances is the best in the Kralovehradecky region in eastern Bohemia.

The highest number of municipalities with an increased rate of risk in the management of their finances was in 2011 recorded in the category of municipalities whose citizen numbers range from 201 to 1,000.

The group of entities with a higher rate of risk last year also included the Stredocesky region in central Bohemia. A regional government was in this group for the first time in the history of the Czech Republic.

Seven municipalities have in the past four years regularly breached the indicator of the ratio of loan capital to the total assets as well as the indicator of the total liquidity, according to the study.

The municipalities are Menany, Prameny, Nebanice, Rybnice, Bublav, Pohled and Podhorany u Ronova.

"One-off breach of the set rules is not a significant problem. On the other hand, a relapse always signals danger, especially when the breach of the set indicators lasts for several years," Michal Ricar of the Bisnode group that owns CEKIA said.

Municipalities started to have bigger problems with the state of their finances after the beginning of the global financial crisis when the performance of the Czech economy worsened, CEKIA said.

However, in 2011 municipalities managed to cut their debts better than in the previous years, according to the study written by CEKIA.

Number of municipalities with higher rate of risk in past 11 years:
Year Number of municipalities
2001 34
2002 36
2003 36
2004 32
2005 29
2006 22
2007 17
2008 25
2009 43
2010 64
2011 84

Source: CEKIA