Klaksvík municipality seeks operating credit line

Klaksvík town council will vote Thursday evening on a proposal to grant the municipality a 20 million krona operating credit line, Kringvarp Føroya reports.

The motion, citing “insufficient liquidity,” would allow the municipality to access the credit line to ensure funds are always available. Mayor Karl Johansen told KVF the measure is strictly about authorizing an overdraft facility, not a loan, and would not increase the municipality’s debt.

Johansen noted that while it is common for municipalities to have such authorization, Klaksvík has never had one, requiring a council majority to approve it.

The finance committee has already endorsed the proposal. The motion states that with several major capital commitments pending council approval, additional liquidity will be necessary if these are approved.

A recent review of the municipality’s accounts for the first months of the year showed some operational units struggling to meet their budgets. However, Johansen said the municipality’s overall financial situation has improved in recent years after being burdened by debt.

At the end of last year, the municipality was 44 million krona away from eliminating its debt ceiling. Johansen expects that gap to widen to 60 million krona by the end of this year as the municipality continues to pay down its debt.