Public Finance
Importance of good public finance management
The budget of the Republic of Serbia and other countries in the region accounts for more than 50% of national gross domestic product (GDP), which means that the government relocates more than half of all goods and services produced.
Given that fact, public financial management is essential for economic development, availability of public services and quality of life of citizens.
Public finance cycle
Relation between the central government and local governments, as well as decentralization and transparency in the spending of public funds are just some of the important areas of public finance.
Services in the area of public finance
During 2010, the company WM Equity Partners was engaged for the first time by the international development project for the support to the local governments (MSP IPA 2007) and since then the services from the field of public finance have been a significant part of the consulting services of our company. We provide these services in Republic of Serbia and in the countries in the region.
The main services in this area include the development of strategic documents, action plans, capital investment plans, issuing of municipal bonds and training of local governments for the process of program budgeting.
Our consultants participated in the education of banks in the region for creation of a risk assessment model for the financing of local governments – support provided by MIDF.
The most important projects
Our experts participated in drafting the Guidelines for issuance of municipal bonds, and due to high interest, this publication had three editions.
Municipal bonds
Since 2011, our team of experts in cooperation with the Standing Conference of Towns and Municipalities was involved in the project of emission of the first municipal bonds in the Republic of Serbia.
The project was successfully implemented by issuing municipal bonds of Novi Sad, Pančevo, Šabac and the municipality of Stara Pazova through which was raised over 40 million EUR of capital in order to finance projects that were listed by the local governments.
Bonds of the city of Šabac and the municipality of Stara Pazova have been successfully listed on the Belgrade Stock Exchange.
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The advantages of emission of municipal bonds
Advantages of financing projects by issuing municipal bonds are significant and a special attention deserves the fact that the emission of municipal bonds can attract a wider base of potential investors, which as a result should have cheaper funding sources.
The potential investor base
The potential investors base consist of insurance companies, pension funds, investment funds, brokers, banks, foreign investors (EBRD, IFC etc.), and by the Public Debt Law amendments, since 2011, citizens also can participate in the primary emission of municipal bonds. Law of Personal Income Tax provides to citizens a favorable tax treatment of returns that are generated from municipal bonds.
In the process of emission of municipal bonds local governments must take into account the possible risks of emission of municipal bonds, primarily the market risk which is related to the changes in market conditions during the period of borrowing and returning liabilities, the operational risk possibly emerging as a result of operational errors in the process due to ignorance of procedures, as well as the regulatory risk that is primary related to the borrowing limits defined by the Public Debt Law and procedures of timely budget planning of capital projects.