The European Commission has called on Montenegro to limit public spending—particularly on public sector wages, social benefits, and subsidies—in its upcoming Economic Reform Programme (ERP) for 2026–2028. The Commission also expects the government to increase public revenues, use budget surpluses to reduce the fiscal deficit and public debt to around 60% of GDP, and conduct a comprehensive review of fiscal risks and current fiscal policies.
The ERP is a medium-term strategy prepared by the government as part of its economic governance dialogue with the EU and serves as preparation for EU membership. It must be submitted to the European Commission by January 15 each year.
Both the European Commission and the International Monetary Fund have emphasized the need to control the public wage bill and identify new sources of revenue to offset losses from the “Europe Now 2” tax reform.
Key recommendations from the European Commission include:
- Curbing current public expenditure and ensuring any revenue surplus is used to reduce the deficit and build up fiscal reserves;
- Establishing a fully functional Fiscal Council to review the 2026 budget;
- Reassessing existing fiscal rules and preparing recommendations for their strengthening;
- Implementing budget measures to boost public revenues;
- Conducting a detailed analysis of fiscal risks, including those from public enterprises.
The EU expects Montenegro’s program to present a realistic and consistent medium-term macroeconomic scenario, with detailed explanations of GDP growth drivers, external debt sustainability, and potential risks from inflation, geopolitical instability, and delayed reforms. It also calls for clear fiscal policy targets, transparency in public spending, and quantified projections for tax measures, wage reforms, and subsidy policies.
Additionally, the Commission urged Montenegro to ensure transparency in appointing Central Bank Council members and deputy governors, strengthen price stability mechanisms under its monetary framework, and improve governance and oversight of the state-owned Development Bank to align with international standards.
Public sector wage reforms and subsidy adjustments are expected to be presented in detail, along with projections of their fiscal impact. The program should also outline financing plans for current and future budget deficits, including potential use of EU resources and debt market access strategies.
