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The first financial daily reported on Thursday that the expected earnings of some local government special bond projects are overstated. If the subsequent repayment of principal and interest fails to meet the expected earnings, the local government can only rely on the sale of land to repay the money, so it is necessary to be aware of the relevant government debt risks.
The report quoted local development and reform officials as saying that some local government special bond projects make up income according to how many times the income covers the principal and interest. In the past few years, it's OK to repay only the interest, but when the principal and interest need to be repaid later, if the project doesn't have so much income, there is a risk of repayment, and the local government can only sell the land if it doesn't have enough money.
For example, a special debt project developed by an industrial park needs to work out the expected income and financing balance plan of the project. Because the income cannot be determined, it can only be made up according to the seven-year bond issuance period and at least 1.5 times the principal and interest covered by the income. It is difficult to introduce high-end enterprises into the Western Park, so the future benefits are not necessarily good. There is little pressure to repay only the interest in the first seven years, but when the principal and interest need to be repaid in the next seven years, if the park can't collect money, it may have to sell the land to repay the debt.
"In the prediction of the income of a special debt project of a remote Expressway in the west, the income of high-speed toll in the past 20 years is nearly 10 billion yuan, and the expected income is frightening. The income of the expressway with good traffic flow in this area can only reach about 300 million yuan a year, so this income is expected to have obvious moisture." The person added.


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