The institute for European Politics and Reforms (IPRE) has launched a new graphic spot to help people understand what a municipal bond means, how it works and what benefits it would bring to citizens if implemented.
The IPRE experts stress that the local authorities are facing a constant shortage of funds for the implementation of development projects, which discourages the citizens and forces many of them to seek for a better life abroad. Last year, only 9% of municipalities’ expenditures were directed towards investments in industry, construction and transport. One of the solutions to increase the investments is to identify alternative funding sources, such as municipal bonds.
“These bonds are a kind of “credit cards” for cities, a tool used by municipalities in order to collect funds for a specific project. Borrowing money from citizens, and obtaining funds as a result of bonds sale will allow building infrastructure projects: roads, culverts and schools. Such projects raise the value of the city and increase the benefits of the investors over time”, says the new video sequence.
The authors explain very simply how these bonds work: the municipality puts up for sale a number of bonds. The citizens who buy these bonds become “investors” and when an investor buys a bond, it means that he actually lends money to the municipality. And the municipality, in its turn, pays the interest in the form of regular coupons and returns the originally invested amount by the end of the scheduled deadline.
Although there more than 20 years of trying to build a functioning financial system, most citizens see it as an obscure structure used for the purpose of misappropriation of funds. As a result, the lack of confidence will be the primary obstacle in the way of the first issue. But, according to IPRE moderators, this phenomenon can be refuted by guaranteeing the bonds with assets owned by the municipality, which in case of failing to honor payment obligations will become the investor’s property. Thus, Moldova will no longer be the European country where no municipal bond has been registered yet.
This is the second movie in the IPRE series of 16 videos, which develop the concept of public policies together with citizens and for citizens. The other graphic spots will be launched by the end of the year. Each movie will explain what is a public policy developed in the following fields: social and healthcare, economic development, justice and corruption, foreign policy and European integration. The project is supported by the European Endowment for Democracy, based in Brussels.