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Financial Administration

The Public Debt Act

Amended and promulgated per the Order of President-Hua-Zong-1-Yi-Tze No. 0900023620 on February 6, 2002
  • Article 1
    This Act is set down in support of a sound national fiscal system, addressing to national development needs and governing the public debts of the central and various local governments. Other relevant laws are applicable where no explicit stipulation has been made herein.

  • Article 2
    Competent authorities in charge of pblic debts are: the Ministry of Finance on the central government level; the municipal governments on the special municipality level; the county/city governments on the county/city level; and the township/city offices on the township/city level.

  • Article 3 
    The term "public debt" in this Act refers to the following forms of liabilities borne by the central and various local governments for affording public expenditures:

    1. Government bonds, treasury bills, local/foreign loans, guaranteed liabilities of the central government.
    2. Government bonds and local/foreign loans of special municipalities and counties/cities.
    3. Local/foreign loans of townships/cities.

    The term "loan" in this Act refers to local/foreign long-term, short-term, overdraft and extension of funds borrowed by governments of all levels in a the form of a contract; the term "loan cap" refers to newly accrued liabilities arisen from discrepancies between fiscal revenues and expenditures, and debt service funds taken out other than repaying the old ones.
    The central government’s liabilities as referred to in Paragraph 1 preclude those assumed by the central bank in attaining financial adjustments and stability.

  • Article 4 
    The forecast outstanding of public debts extending more than one year borrowed by the central and local governments, on the general budgets, special budgets, and in the form of special fund budgets beyond the operating funds and trust funds, shall not exceed 48% of the average gross national product (GNP) of the previous three years as forecast by the Directorate-general of Budget, Accounting and Statistics, Executive Yuan. The allocation of this percentage is as follows:
    1. 40% for the central government.
    2. 5.4% for special municipalities, of which 3.6% is for Taipei City, and 1.8% for Kaohsiung City.
    3. 2% for counties/cities.
    4. 0.6% for townships/cities.

    The forecast outstanding of public debts extending more than one year borrowed by counties/cities and townships/cities, rated in proportion against the sum of expenditures in a government's general budgets and special budgets, shall not exceed 45% and 25% respectively.
    The forecast outstanding of public debts as referred to in the preceding two Paragraphs shall preclude self-redeeming public debts borrowed by the central government and governments of all levels. However, when the source of self-redeeming finance ceases to exist, such loans shall be properly accounted for.
    The term "self-redeeming public debt" as referred to in the preceding Paragraph shall pertain to liabilities to be repaid by the future expectant income derived from the operation or by specifically allocated source of finance.
  • The annual loan cap on the general budgets and special budgets of the central government and local governments may not exceed 15% of the annual expenditures on the general budgets and special budgets.
    The outstanding of public debts maturing within one year borrowed by the central government and local governments for the purpose of counterbalancing their treasury income and expenditure shall not exceed 15% and 30% of their respective annual budgets and special budgets respectively.
    Should the sum of public debts borrowed by the central and local governments exceed the loan cap as stipulated herein, no further loan is permitted until the amount of debt has been subsided to meet the prescribed loan cap.
  • Article 5 
    The supervisory authorities in charge of public debts are:
    1. The Executive Yuan is responsible for monitoring public debts of special municipalities and counties/cities.
    2. The county governments are responsible for monitoring public debts of townships/cities.

  • Article 6 
    The central competent authority, upon approval of the Executive Yuan, may dispatch auditors to audit public debts of special municipalities and counties/cities.
    The county governments may dispatch auditors to audit public debts of townships and cities.

  • Article 7 
    Where there is possibility that a special municipality, county/city government may fail its obligation as to its liabilities, the central competent authority may report to the Executive Yuan for restricting or suspending its borrowing.
    Where there is possibility that a township/city office may fail its obligation as to its liabilities, the county government may restrict or suspend its borrowing.

  • Article 8 
    Where the Ministry of Finance, or any of the special municipalities, counties/cities, townships/cities is involved in any of the following scenarios, except in the case that the Ministry of Finance is legally supervised by the Control Yuan, rectification or repayment within specified period shall be ordered by the respective supervisory authorities. For those failing to rectify or repay before the deadline, apart from suffering subsidy cut or suspension, the Minister of Finance, mayor of special municipalities, magistrate of counties/cities and head of township/cities shall be delivered for reprimand:
    1. Violating the allocation scheme as stipulated in Article 4, and over-borrowing in excess of the loan cap.
    2. Continuing to borrow despite having been restricted or banned from incurring further debts pursuant to the preceding Article.
  • Article 9 
    The competent authorities in charge of monitoring public debts shall duly compile a monthly report on the following items and filed with their supervisory authority for reference, and shall disclose the information in the government gazette or major newspapers within two months following the end of a fiscal year:
    1. Types of the public debts.
    2. Outstanding balance of public debts.
    3. Repayment of principal and interest on public debts.
    4. Other pertinent issues.

  • Article 10 
    The central government and special municipal governments, in stepping up debt management and improving financial efficiency, may set up Debt Service Funds for fund-raising, repaying maturing debts, making early repayment of debts in part or in full, and converting high-interest debts to low-interest debts, and other relevant financial affairs.
    The funding sources for the foregoing Debt Service Funds are as follows:
    1. The government’s allocation for annual repayment of principal in its general budgets and special budgets.
    2. Principal and interest recalled on funds set aside for redemption of bonds that have exceeded the legal deadline.
    3. Interests accrued and operating yields arisen from the Debt Service Funds.
    4. Other pertinent income.

    For meeting the needs of principal repayment or debt conversion, the Debt Service Funds may, under the premise of not increasing the existing liabilities, raise working fund by issuing bonds, borrowing from financial institutions, and maneuvering fund from other special fund accounts.
    The Debt Service Funds as mentioned in Paragraph 1 may be used for the following purposes:
    1. To repay outstanding principal of government debts.
    2. To repay the principal, interest and related handling charges of funds raised as described in the preceding Paragraph.
    3. To cover the management and general administration expenses.
    4. To cover other pertinent expenses.

    The Debt Service Funds may be used to pay interest and related handling charges of debts listed in general budgets and special budgets.
    The sum of principal repayment as mentioned under Subparagraph 1 of Paragraph 2 shall be at least 4% of the total yearly tax revenues in the fiscal year 2002, and at least at 5% from the fiscal year 2003 onward. The central competent authority is to draft Regulations Governing the Custody and Utilization of Central Government Debt Service Funds, in consultation with the Central Bank, which shall be reported to the Executive Yuan for approval.

  • Article 11 
    Where the governments of all levels whose outstanding public debts exceed the loan caps stipulated herein on the date this Act is amended and promulgated, they shall rectify the discrepancy within the ensuing three years.

  • Article 12 
    This Act shall come into force on the date of amendment and promulgation.