The Ministry of Finance, despite planning multiple development projects and managing annual loans primarily aimed at settling past debts, is under the oversight of public debt, as reported today from that department.

They claim that these actions are strategically defined.

“Furthermore, the projects that were completed under the International Monetary Fund (IMF) guidelines at the end of January and early February do not encompass measures dictated by fiscal strategy. The anticipated decrease in borrowing costs in the international market is also reflected in the latest bond issuance in March this year,” stated officials from the Ministry.

On May 3, the IMF published its conclusions from the Executive Board following a mission and consultations with Montenegro in accordance with Article IV of the IMF’s Articles of Agreement. The report acknowledged the strong commitment of Montenegrin authorities, highlighting the momentum generated after the new government was formed towards necessary structural reforms and advancement in the EU accession process.

“The IMF has confirmed robust economic recovery post-COVID-19 and a marked improvement in the fiscal position,” commented representatives from the Ministry of Finance.

Consequently, the IMF encourages authorities to build on previous achievements through effective fiscal policy, further bolstering the financial sector, and diversifying the economy, providing expert support from the IMF where necessary.

They welcomed the commitment to fiscal caution within established frameworks (60% of GDP) and the plans to develop and adopt a fiscal strategy along with a new long-term debt management strategy. The agreement is that maintaining a zero primary balance will aid in keeping debt levels below 60% of gross domestic product (GDP).

The IMF projected a fiscal deficit for the year 2024, alongside a gradual increase in debt due to funding requirements.

This specified deficit will primarily reflect new investments in existing capital or infrastructure projects (such as schools, hospitals, and water supply systems), including significant further construction of remaining highway segments, necessitating additional financing for all projects.

“As previously mentioned, the primary source for additional budget funding will be financing projects vital for improving citizens’ economic and social well-being,” the Ministry stated.

The IMF Executive Board concurred that adjustment measures will be necessary to maintain the debt threshold of 60% of GDP in the medium to long term, adhering to current budget and fiscal responsibility laws that deliver a strong fiscal signal regarding responsibilities.

Among the key findings of the mission report is that the fiscal position has significantly improved in recent years, with public debt, which reached 107% of GDP in 2020, now estimated at 61.5%.

Additionally, they emphasize that the authorities successfully accessed the international market in March of this year.

The IMF notes that the authorities have leveraged international markets better, issuing bonds at more favorable rates compared to the IMF’s basic projections.

The IMF states that structural fiscal reforms are critical for sustaining healthy public finances, including “enhancing Tax Administration, improving social service consumption growth, registering public sector salaries, and reforming government enterprises.”

Moreover, it appears that the Montenegrin economy is significantly healthier, benefiting from strong tourism and increased spending, attributed to reforms initiated in 2022, as well as the influx of wealthier Russian and Ukrainian citizens.

The unemployment rate has dropped to its lowest historical level, with GDP growth of 3.7% expected to continue at 3% in the medium term.

Unless new shocks disturb the international market price, the gap between inflation in Montenegro and the eurozone, currently at 1.7 percentage points, is projected to narrow further.

Among other recommendations, the IMF suggests that the country can mitigate economic volatility through the production of renewable energy, maintaining a robust fiscal strategy, bolstering the banking system, and enhancing the framework for preventing money laundering and terrorist financing, while harnessing the vast potential of women in the workforce.