Seven years later, municipalities again record a budget deficit in 2021

Local government recorded a budget deficit of 15 million euros last year, the first since 2013, but still below the state budget estimate for 2021, the Finance Council published today (CFP).

In the report on the budgetary evolution of local government in 2021, which is based on the accounting values ​​of the public budget for 299 of the 308 Portuguese municipalities, the CFP indicates that "a budget deficit of 15 million euros was registered, the first since 2013, lower however than that forecast by OE2021 [Orçamento do Estado para 2021]”, in which a deficit of 216 million euros was forecast.

The institution headed by Nazaré Costa Cabral explains that the increase in municipal spending in 2021 has contributed to this performance, which is higher than the increase in revenue, although the latter aggregate has recovered from the fall recorded in 2020.

The CFP indicates that municipal revenues increased by 11%, more than double the OE2021 forecast for the local sub-sector (4,8%).

On the other hand, transfer receipts and tax receipts showed “a much more favorable development than expected in this budget programming document”.

Municipal tax revenues, for example, which "virtually stagnated in 2020", presented a much more favorable evolution in 2021, based on the significant increase in the IMT.

“This tax, whose dynamics are strongly linked to the real estate market environment, which was quite favorable in 2021, increased by 38% in 2021, more than recovering from the drop recorded in the immediately preceding year, reaching around 1,3 billion euros”, points out.

According to the same data, municipal expenditure increased by 14,6%, driven, in equivalent terms, by the growth of primary current expenditure, and by the increase in capital expenditure, particularly investment.

The continuity of the pandemic situation, in particular in the first half of 2021, and the subsequent recovery of economic activity in the second half of the year contributed to the recorded development.

The PSC points out that the direct impact on local government spending with the covid-19 measures was higher than in 2020 by 99 million euros, contributing to the increase in spending.

Without this increase in expenditure due to covid measures, the institution indicates that there would have been a surplus from the municipalities, although "lower than that of 2020".

“Despite the limitations regarding the complete availability of budget and financial information, there is evidence that unpaid municipal expenditures will have decreased in 2021, both in terms of non-financial liabilities and accounts payable,” he points out.

The same report underlines that, on the other hand, the debt already unpaid and overdue “will have remained at the same level as in 2020, although some municipalities have recorded a worsening of this indicator”.

According to the analysis, the "stock" of late payments, which has shown a downward trend since 2012, amounted to 22 million euros at the end of last year, in consolidated terms, down by around one million euros.

It notes, however, the increase in late payment of ineffective expenditure of around eight million euros, "which in 2021 is subsumed by the delay in the repayment of financial debts", which largely concerns late payments to the State of Loans to the Municipality of Vila Real de Santo António.

The CFP indicates that between December 2020 and December 2021, the number of municipalities in arrears will have fallen from 60 to 63.

However, about four-fifths of the 308 communes had no arrears at the end of this year, making a total of 245 communes.


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