Local government cash flow situation as viewed from the fiscal indicators of the Assessment of Fiscal Conditions

From the viewpoint of confirming the certainty of repayment of fiscal loans to local governments, the Ministry of Finance (MOF) has been conducting the Assessment of the Fiscal Conditions of local governments by creating an Administrative Cash Flow Statement that focuses on cash flows by recombining existing account settlement statistics. This paper uses the fiscal indicators (FY2007-FY2018) to clarify the characteristics of the indicators and examine the cash flow situation. In recent years, while local governments have improved their accumulated and real debt situations, the administrative current balance ratio, which represents the account balance condition, has declined, and their cash flows are becoming increasingly severe. As a result, the number and potential members of local governments that fall under “Fiscal Considerations” based on the diagnostic criteria for the Assessment of Fiscal Conditions have been increasing, and it was found that the increase in expenditures due to property, assistance, and subsidy expenses has contributed to this increase. When the amount of revenues from the hometown tax donation is large, the administrative current balance ratio may apparently deteriorate. However, this does not affect the results of the study. The Assessment of Fiscal Conditions is an effective indicator for understanding the cash flow situation of local government and is also useful from an academic point of view.