The Borrowing System of Hungarian Local Governments: Legal Framework, Economic Impact and Future Prospects

The borrowing system of Hungarian local governments plays a crucial role in ensuring financial stability while supporting local development. This study provides a comprehensive analysis of the historical development, the legal framework and the economic and social impact of local government borrowing in Hungary. The research highlights the legal foundations based on the European Charter of Local Self-Government and the Hungarian Basic Law, and emphasises the strict borrowing limits imposed to prevent financial imbalances. A comparative approach is used to examine the Hungarian system in relation to other European models, in particular those of the Visegrád countries, highlighting key similarities and differences. While financial stability and debt control are the main advantages of the current system, challenges such as centralisation, administrative burden and limited financial autonomy of local governments are also identified. The study examines alternative sources of financing, including European Union funds and national grant programmes, and assesses their role in reducing local government debt dependency. The findings suggest that future reforms should focus on increasing decentralisation, simplifying borrowing procedures, improving financial literacy and promoting the digitalisation of financial management. These measures could contribute to a more efficient and sustainable municipal financing system in Hungary, while maintaining fiscal discipline.