Economic analyst Predrag Zečević has assessed that Montenegro is currently managing its public debt effectively. With deposits and gold reserves included, the debt level falls below Maastricht criteria. While future borrowings from the World Bank and domestic bond issuances are not concerning, the repayment of 750 million euros from Prime Minister Zdravko Krivokapić’s tenure presents a significant challenge for the coming year.
In an interview with Radio Montenegro, Zečević praised the Fiscal Strategy, which is currently under public review, as a sound document. He dismissed criticisms from the hospitality sector regarding the VAT rate equalization.
As reported by the Ministry of Finance, public debt surpassed four and a half billion euros by the end of June, representing over 62% of GDP. However, including deposits and gold reserves, the debt level drops to slightly above 53% of GDP. Zečević considers this debt situation favorable, assuming a budget deficit of 3%, and believes Montenegro is meeting the Maastricht criteria.
Looking ahead, Zečević identifies the next year as particularly challenging due to the upcoming repayment of a 750 million euro Eurobond issued during Krivokapić’s administration. Additionally, with the planned shutdown of the Thermal Power Plant, Montenegro will need to import electricity. Despite these concerns, Zečević views the current year positively in terms of debt management.
Montenegro has borrowed nearly 700 million euros through international bonds this year, and the Fiscal Strategy plans to issue 50 million euros in bonds on the domestic market. Zečević supports this approach, noting that banks currently hold 5.4 billion euros of “idle capital.”
He advocates for continued cautious borrowing, emphasizing that funds should be directed towards development projects like highway construction rather than public consumption.
Negotiations are also in progress for a 180 million euro loan from the World Bank by the end of the year. Zečević highlights that this is a routine matter, as Montenegro has had credit arrangements with the World Bank for around 15 years.
Zečević describes the Fiscal Strategy as beneficial, noting that it could increase wages by reducing contributions to the Pension and Disability Insurance Fund. This, in turn, could attract investors due to lower tax burdens. He also addresses the concerns of hoteliers regarding the VAT rate equalization to 15%, suggesting that high hospitality prices in Montenegro justify this measure.
Finally, Zečević considers the 50-year lease agreement for the Steelworks as a potentially effective solution to revitalize the enterprise, which has lost its exclusive right to acquire old steel amid pressure from Chinese companies.
