Calculation of the indicator Average Payment Period (PMP) for Local Government

The formula for calculating the Average Payment Period (PMP) indicator for Local Government is based on the provisions of paragraph 4 of Order no. 9870/2009 of 13 April of the Minister of State and Finance (in Portuguese only), in conjunction with paragraph 7(c) of Council of Ministers Resolution no. 34/2008 of 22 February (in Portuguese only).

For each quarter, the payment period is equal to multiplying by 365 (days) the ratio between the short-term debt to suppliers at the end of that period and the amount of purchases of goods and services accumulated in those three months. Thus, the PMP at the end of each quarter corresponds to the weighted average of the payment periods calculated over the last four quarters. This is equivalent, arithmetically, to multiplying by 365 the ratio between the average short-term debt to suppliers (DF) over the last four quarters and the sum of purchases in that period, regardless of their settlement (A), according to the following formula:

From 1 January 2020 onwards, the implementation of the SNC-AP (Accounting Standardization System for Public Administrations) by local authorities made it necessary to adjust the methodology for calculating the PMP, specifically in terms of the accounts to be considered for calculating short-term debts to suppliers and acquisitions. The adoption of this new accounting framework implied a break in the PMP series compared to the indicator calculated under the previous accounting framework (“POCAL”).

In practical terms, the accounts of the SNC-AP considered for the calculation by the General Directorate for Local Authorities (DGAL) are those shown in the table below. It should be noted that DGAL's calculation considers the data from the "Analytical Balance", reported by municipalities through SISAL (information system for the local administration sector).

Source: Own elaboration, based on information published by DGAL.

* This Explainer is an integral part of the Report 09-2023 "Local Government Budgetary Developments in 2022", drawn up and published by the CFP in October 2023.

Date of last update: 27/11/2023