Financial Sustainability in Rural Areas in Bulgaria

Stefan Damyanov Petrov

Abstract: One of the main functions of municipalities, as defined by national legislation, is the function associated with the implementation of the state policy for economic development locally. In this regard, the establishment and maintenance of technical infrastructure and other relevant commitments of the municipalities should be included in their investment activity. Identification and inclusion of investment intentions in key planning and operational documents, however, should comply with the financial capacity and capabilities of each municipality. Limited financial resources of EU Structural Investment Funds put rural areas municipalities in the complex situation to tailor their investment activity to the limitations of their municipal budgets. At the same time, the financial status of municipalities in rural areas is characterized by significant indebtedness, decapitalisation processes, poor financial performance indicators and weak financial discipline. The main objective of the survey is to identify the main features of municipal finances in rural areas, which are key for the development of the rural areas. For this purpose, the calculated financial and fiscal sustainability indicators are compared with average value for the country and non-rural municipalities. The comparison is used benchmarking techniques and the descriptive statistical tools. The main results show a serious lack of financial and fiscal discipline which suggests that the financial problems of municipalities in rural areas are results of the general economic and financial conjuncture in the country and of the shortage of management capacity of the municipal budgets.

Keywords: financial stability; fiscal sustainability; municipal finance; rural areas

Date published: 2018-01-31