Financial Condition of Brazilian Municipalities in the Context of the Covid-19 Pandemic
DOI:
https://doi.org/10.21118/apgs.v16i1.15423Abstract
Objective: We analyzed the behavior of the factors that compose the financial condition index (ICF) of Brazilian municipalities in the context of the Covid-19 pandemic, considering the time frame of 2019-2020.
Theoretical Framework: We used the financial condition model proposed by Cabaleiro et al. (2013) based on the dimensions of sustainability, flexibility, and vulnerability.
Methodology: We used factor analysis to form the factors and the ICF, followed by a cross-analysis of its behavior in the period.
Results: The allocation of municipalities in four situations was evidenced: highlighted cases, recovery, critical difficulty, and decline. Furthermore, the current vulnerability was the most important factor in determining financial condition in 2019 and overall flexibility 'differentiated' in 2020. Thus, lower dependence on resources from other government spheres and greater coverage of non-financial expenditures, respectively, contributed to better financial condition each year.
Originality: Applying an alternative model to the Brazilian context, which optimally weighs the multiple indicators used in assessing the governmental financial condition.
Theoretical and practical contributions: The ICF makes it possible to assess the financial condition, serving as a tool to understand how different factors impact it. It also contributes to the public finance literature since the main objective of using indicators for local governments is to retrospectively assess their financial condition and meet compliance requirements, especially in periods of crisis, such as the one resulting from the Covid-19 pandemic.
Keywords: Financial Condition; Governments; Covid-19; Factor Analysis
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