Municipality Indebtedness Evaluation Model based on System Approach

The total debt of the Czech Republic (CR) municipalities has stayed, in the recent years, on generally the same level. The total volume of municipal debt (MD) does not represent a serious problem when compared with the total public finance sector debt. However, due to the fact that in the CR there are dramatic differences in the size of individual municipalities, municipal indebtedness is a very serious issue for municipalities of various sizes. The objective of this article is to evaluate and analyze municipal indebtedness of the CR municipalities (with the exclusion of the capital city Prague) from the point of view of their size - both for the entire CR and the NUTS2-Northeast (NUTS2-NE) region, for the year 2013. Selected indicators have been used to evaluate MD. One of them is the "budget responsibility" indicator. This indicator will be compulsory for municipalities based on approving the CR constitution law. Another indicator is the share of debt in the total municipality assets. We have used a system approach for executing this analysis. The analysis has showed that on the entire sample of municipalities, there are no municipalities in the individual size categories that would show critical values of both examined indicators.