Montenegro will need approximately €1 billion in 2024 to settle debts from previous years, with half of that amount allocated to repaying euro bonds issued in 2018, according to Finance Minister Novica Vuković.
As of September 30, 2024, Montenegro’s public debt stood at €4.46 billion, or 61.33% of the country’s GDP. After accounting for deposits held by the Ministry of Finance (€617.9 million), the net public debt was €3.85 billion, which is 52.84% of GDP.
Vuković explained that when he took office, the country’s finances were in a concerning state, with just €155 million in government accounts and a deficit of over €250 million expected by the year’s end. As a result, the government secured urgent loans, including €109 million from domestic banks at an interest rate of 6.55% with a maturity of 54 months, and €50 million from state securities at a 3.7% interest rate.
Debt servicing and borrowing
From October 2023 to October 2024, Montenegro serviced about €500 million in principal and €158 million in interest on outstanding debt. To address budget gaps, the Ministry of Finance issued €750 million in bonds in March, with an interest rate of 5.88%. A hedging transaction was conducted to mitigate currency risks, resulting in €687.76 million being raised in euros.
Vuković confirmed that the government had also secured an additional €80 million from the World Bank, bringing the total borrowing for the year to over €930 million.
Concerns about debt growth
Vuković responded to concerns raised by MP Miloš Kontar (URA) regarding the projected increase in Montenegro’s public debt by €1 billion by 2027. Kontar expressed concerns that the government’s policy of cutting pension and social security contributions would lead to deficits of €200 million this year and €400 million next year, potentially putting the country into a cycle of borrowing to repay loans.
In response, Vuković emphasized that the government’s priority is to improve citizens’ quality of life and that any salary or pension increases would not be funded by new borrowing. He also pointed out that government revenue had increased by €170 million in the first nine months of 2024, leading to a budget surplus of €85 million.
Fiscal strategy and economic outlook
Vuković reiterated the government’s focus on maintaining fiscal and macroeconomic stability, reducing non-productive expenses, increasing budget revenues, and creating conditions for sustainable economic growth. He highlighted positive assessments of Montenegro’s financial health from international credit rating agencies, including Moody’s and Standard & Poor’s, which had recently upgraded the country’s credit rating.
Local employment and infrastructure development
Regarding local employment, Vuković addressed concerns raised by MP Nikola Milović (DPS) about the increasing number of employees in the Budva municipal administration. He clarified that municipalities are not required to obtain approval from the Ministry of Finance for hiring, unless they have an agreement related to debt restructuring.
In terms of infrastructure, Vuković confirmed that funding for the Lovćen-Cetinje cable car project would be included in the 2025 budget, with a focus on resolving property rights and finalizing technical documentation. However, the project is not expected to be completed for several years, a timeline that caused disappointment among MPs, including Filip Adžić (URA), who had hoped for quicker progress.
