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Dr. GÁBOR PÓSCHDr. GÁBOR PÓSCH
State Audit Office Hungary
Rural Credit Guarantee Schemes
Budapest, 12-13 January 2006.
STATE GUARANTEES IN HUNGARY
2
INTRODUCTIONINTRODUCTION
• LEGAL BACKGROUNDLEGAL BACKGROUND
• CLASSIFICATION OF STATE GUARANTEESCLASSIFICATION OF STATE GUARANTEES
• INSTITUTIONAL FRAMEWORKINSTITUTIONAL FRAMEWORK
• CHARACTERISTIC DATACHARACTERISTIC DATA
• GUARANTEES FOR AGRICULTURAL SECTOR AND GUARANTEES FOR AGRICULTURAL SECTOR AND FOOD INDUSTRYFOOD INDUSTRY
• EXPERIENCES OF THE STATE AUDIT OFFICEEXPERIENCES OF THE STATE AUDIT OFFICE
3
INTRODUCTIONSTATE GUARANTEESTATE GUARANTEE
• Financial mean for economic policy of the Financial mean for economic policy of the governmentgovernment
• Indirect subsidy from the state budgetIndirect subsidy from the state budget
• Function: to be of assistance for necessary credit for Function: to be of assistance for necessary credit for investment or maintain the businessinvestment or maintain the business
The institution of state guarantees were introduced firstly The institution of state guarantees were introduced firstly in the state budget of 1991in the state budget of 1991
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1. LEGAL BACKGROUND
Act on State HouseholdAct on State Household
Parliament ensures appropriations (expenditures) in the Parliament ensures appropriations (expenditures) in the yearly budget for financing the acceptance of guaranteesyearly budget for financing the acceptance of guarantees
authorises the Government to engage specific state authorises the Government to engage specific state guarantees in limited holdingsguarantees in limited holdings
authorises the Government to guarantee credits provided authorises the Government to guarantee credits provided by international financial institutionsby international financial institutions
legal base for counter-guaranteelegal base for counter-guarantee
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Act on yearly State Budget definesAct on yearly State Budget defines
limit of the specific governmental guaranteelimit of the specific governmental guarantee
limit of state guarantee on exhibitions of fine artslimit of state guarantee on exhibitions of fine arts
appropriations (expenditures) for direct and counter-appropriations (expenditures) for direct and counter-guaranteesguarantees
for counter-guarantee companies for counter-guarantee companies
- holdings of guarantees- holdings of guarantees
- maximum amount of credit to be - maximum amount of credit to be guaranteedguaranteed
- maximum percentage of credit to be - maximum percentage of credit to be guaranteedguaranteed
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Governmental/Ministerial DecreesGovernmental/Ministerial Decrees
procedure of direct state guarantees and counter-procedure of direct state guarantees and counter-guaranteesguarantees
engagementengagement
acceptance of the guaranteeacceptance of the guarantee
regainregain
process of accountancyprocess of accountancy
control of the procedurecontrol of the procedure
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2. CLASSIFICATION OF STATE GUARANTEES
DIRECT STATE GUARANTEEDIRECT STATE GUARANTEE
1.1. Based on actsBased on acts
state budgetstate budget
other acts other acts
student creditstudent credit
housing credithousing credit
housing credit for housing credit for public servantspublic servants
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2. Specific governmental guarantee2. Specific governmental guarantee
based on governmental resolutionbased on governmental resolution
Performance: TAX AUTHORITYPerformance: TAX AUTHORITY
INDIRECT STATE GUARANTEEINDIRECT STATE GUARANTEE
Counter-guaranteeCounter-guarantee
Performance: guarantee companyPerformance: guarantee company
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3. INSTITUTIONAL FRAMEWORK
MINISTRY OF FINANCEMINISTRY OF FINANCE
• Evaluation / Follow upEvaluation / Follow up
• Counter sign / ControlCounter sign / Control
acceptance for specific governmental acceptance for specific governmental guarantees andguarantees and
guarantees on by-lawsguarantees on by-laws
• Proposal for appropriationsProposal for appropriations
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HUNGARIAN STATE TREASURYHUNGARIAN STATE TREASURY
• Data processData process
• Money transferMoney transfer
• AccountancyAccountancy
TAX AUTHORITYTAX AUTHORITY
Responsible forResponsible for
• Specific governmental guaranteesSpecific governmental guarantees
• Guarantees on by-lawsGuarantees on by-laws
•Agricultural guaranteesAgricultural guarantees
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GUARANTEE COMPANIESGUARANTEE COMPANIES
• EXIMBANK COEXIMBANK CO
• EXPORT CREDIT INSURANCE COEXPORT CREDIT INSURANCE CO
• HUNGARIAN DEVELOPMENT BANK COHUNGARIAN DEVELOPMENT BANK CO
• CREDIT GUARANTEE COCREDIT GUARANTEE CO
• RURAL CREDIT GUARANTEE FOUNDATIONRURAL CREDIT GUARANTEE FOUNDATION
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ACCEPTANCE OF GUARANTEES AND REGAINSACCEPTANCE OF GUARANTEES AND REGAINS
ExpendituresExpenditures 2000.2000. 2001.2001. 2002.2002. 2003.2003. 2004.2004.
Direct state quaranteesDirect state quarantees 0.1 0.1 - - - - 9,5 9,5 - -
Counter-guaranteesCounter-guarantees 5,7 5,7 7,3 7,3 3,4 3,4 2,9 2,9 2,7 2,7
————————————————————————————
ΣΣ 5,8 5,8 7,3 7,3 3,4 3,4 12,4 12,4 2,7 2,7
Bn HUFBn HUF
4. CHARACTERISTIC DATA
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IncomesIncomes 2000.2000. 2001.2001. 2002.2002. 2003.2003. 2004.2004.
Direct state quaranteesDirect state quarantees 3,0 3,0 2,9 2,9 2,7 2,7 1,9 1,9 0,5 0,5
Counter-guaranteesCounter-guarantees 2,7 2,7 2,1 2,1 1,5 1,5 1,0 1,0 1,9 1,9
————————————————————————————
ΣΣ 5,7 5,7 5,0 5,0 4,2 4,2 2,9 2,9 2,4 2,4
————————————————————————————————————————————————————
BalanceBalance -0,1-0,1 -2,3 -2,3 0,8 0,8 -9,5 -9,5 -0,3 -0,3
————————————————————————————————————————————————————
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Holdings of state guaranteesHoldings of state guarantees
Bn HUFBn HUF
2000.2000. 475,5475,5
2001.2001. 817,4817,4
2002.2002. 805,3805,3
2003.2003. 1 124,91 124,9
2004.2004. 1 166,11 166,1
2005.2005. 1 211,31 211,3
1. half1. half
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Outstanding Debts to StateOutstanding Debts to State
Bn HUFBn HUF
2000.2000. 7,97,9
2001.2001. 6,86,8
2002.2002. 3,43,4
2003.2003. 9,99,9
2004.2004. 9,59,5
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5. GUARANTEES FOR AGRICULTURAL SECTOR AND FOOD INDUSTRY
Yearly State Budget definesYearly State Budget defines
Objects of creditsObjects of credits
Percentage of guaranteePercentage of guarantee
Holdings of guaranteeHoldings of guarantee
Expenditure for acceptance of guaranteeExpenditure for acceptance of guarantee
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Decree of the Minister of Agriculture regulatesDecree of the Minister of Agriculture regulates
Conditions of guaranteeConditions of guarantee
Rights and obligations of the banks and debtorsRights and obligations of the banks and debtors
ProcedureProcedure
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Tax AuthorityTax Authority
Performs the acceptance of guaranteePerforms the acceptance of guarantee
Controls the relevant documents in situ as wellControls the relevant documents in situ as well
Makes resolution on application concerning Makes resolution on application concerning acceptance of guaranteeacceptance of guarantee
Transfers the relevant amount to creditorsTransfers the relevant amount to creditors
Obliges the deptor for repayment of the Obliges the deptor for repayment of the guarantee paid for the banksguarantee paid for the banks
Makes the necessary steps to collect the debtsMakes the necessary steps to collect the debts
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Agricultural GuaranteesAgricultural Guarantees
Holdings of GuaranteesHoldings of GuaranteesBn HUFBn HUF
2000.2000. 33,533,5
2001.2001. 36,236,2
2002.2002. 39,239,2
2003.2003. 36,536,5
2004.2004. 31,831,8
2005.2005. 50,650,6
1. half1. half
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Agricultural GuaranteesAgricultural Guarantees
Acceptance of guarantees and regainsAcceptance of guarantees and regainsMill. HUFMill. HUF
ExpendituresExpenditures IncomeIncome ss BalanceBalance
————————————————————————————————————————————————————
20002000 641,1641,1 120,7 120,7 -520,4 -520,4
20012001 2 723,42 723,4 83,4 83,4 -2 640,0 -2 640,0
20022002 641,0641,0 205,3 205,3 -435,7 -435,7
20032003 179,4179,4 68,1 68,1 -111,3 -111,3
20042004 404,3404,3 74,8 74,8 -329,5 -329,5
20052005 548,8548,8 108,4 108,4 -440,4 -440,4
1.half1.half
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Agricultural GuaranteesAgricultural Guarantees
Outstanding Debts to StateOutstanding Debts to State
2000.2000. 8,98,9
2001.2001. 4,84,8
2002.2002. 1,31,3
2003.2003. 1,61,6
2004.2004. 1,41,4
Bn HUFBn HUF
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6. EXPERIENCES OF THE
STATE AUDIT OFFICE
CONSTITUTION CONSTITUTION DECLARESDECLARES
The State Audit Office has to audit the final accounts of the The State Audit Office has to audit the final accounts of the budget and has to inform the Parliament concerning the budget and has to inform the Parliament concerning the execution of the budget and the regulatory of accounts. The execution of the budget and the regulatory of accounts. The appropriations are an integrated part of the budget.appropriations are an integrated part of the budget.
The audit of state guarantees is a very extended one: about 50% The audit of state guarantees is a very extended one: about 50% of transactions are controlled every year.of transactions are controlled every year.
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AUDIT FINDINGSAUDIT FINDINGS
in the first years after introducing state guaranteesin the first years after introducing state guarantees
the government exceeded the limit of the specific the government exceeded the limit of the specific governmental guaranteesgovernmental guarantees
the principle of gross accounting was neglected the principle of gross accounting was neglected (separate accounts should keep for expenditures and (separate accounts should keep for expenditures and incomes)incomes)
to spare expenditures: the government covenanted to spare expenditures: the government covenanted guaranteesguarantees
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in the last 5 yearsin the last 5 years
improvement of the practiceimprovement of the practice
failures were correctedfailures were corrected
proper and regulatory use of public moneyproper and regulatory use of public money