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The budget balance of the Portuguese municipalities reached a surplus of 669 million euros (M€) in the first semester of 2019, according to the preliminary figures of the budgetary implementation, in cash basis. This evolution represents a 282 M€ increase compared to the same period of 2018 and is in line with the increase expected by the Ministry of Finance (MF) for local government in the State Budget for 2019 (SB/2019).


Municipalities’ revenue is growing above the forecast in the SB/2019 for local government. About half of this variation is explained by patrimonial revenue, resulting from the sale of terrains by the Municipality of Lisbon (250 M€) in the first half of 2019 which had not been considered in the SB/2019. Also, the transfers of the SB to the municipalities contributed to a more favourable evolution of the revenue. Fiscal revenue until June grew below the expected due to the negative behaviour of the recurrent property tax (“IMI”) in the semester, which was partially offset by the positive contributions of the other municipal taxes.


The municipal expenditure showed a growth of 6.2% in the first half of the year, driven by the compensation of employees and the capital expenditure, albeit in deceleration from April. The primary current expenditure was the aggregate that contributed the most to the increase in expenditure, representing more than half of the increase recorded between the 1st semester of 2019 and the same period last year. For the increase in the primary current expenditure about three quarters resulted from staff expenditure. In addition, the contribution of capital expenditure, namely investment, has recorded a growth rate higher than initially foreseen for the subsector by June.


The unpaid expenditure of municipalities has increased since the beginning of the year, both non-financial liabilities and unpaid accounts, despite the favourable comparison with the 1st semester of 2018. As for the debt already overdue and arrears there were still individual situations of worsening, with a municipality registering an increase of more than 1 M€, notwithstanding the overall improvement in the reduction of overdue payments since the beginning of the year (much due to the use of financial assistance from the Municipal Support Fund).


The total municipal debt – financial and non-financial debt considered for the purposes of the legal limit – has declined. Excluding non-budgetary debts and legally anticipated exceptions, there was a reduction of 145 M€ in the first half of 2019. Based only on this indicator, 22 of the 308 municipalities were above the total debt limit on June 30, 2019 (at the end of 2018 there were 24 municipalities in this situation). Again, despite the overall improvement, some individual cases of worsening of the financial situation have been recorded.


The average payment period remained at the level verified by the end of 2018: below the 30 days considered as a rule for the payment of commercial transactions.

Date of last update: 12/09/2019

General Government Sectors . Report nº 9/2019 . 12 September 2019