After Montenegro fulfilled demanding reforms jointly agreed upon with the World Bank, the country signed a Development Policy Loan (DPL) agreement amounting to €80 million. Minister of Finance Novica Vuković highlighted this as a significant step towards strengthening economic growth and ensuring long-term stability.
The DPL is a financial instrument provided by the World Bank to support political and institutional reforms in areas such as economic management, public sector governance, human development, infrastructure, and environmental protection. Unlike traditional investment loans, DPLs are disbursed based on the implementation of specific policy measures and reforms.
The Ministry of Finance noted that key achievements recognized by the World Bank include the reduction of public debt due to fiscal reforms and careful budget management, which has boosted confidence among international financial institutions. The establishment of fiscal discipline has been achieved through measures like abolishing health insurance contributions and introducing a progressive income tax.
The World Bank acknowledged Montenegro’s progress towards EU membership, especially in judicial reforms and anti-corruption efforts. Negotiations for this loan began three years ago, and the Ministry has recently completed all agreed reforms focused on enhancing fiscal discipline and promoting sustainable development.
To meet the conditions for this arrangement, Montenegro had to fulfill several criteria, including increasing fiscal revenues and strengthening fiscal discipline. This involved reforms related to pharmaceutical cost control, improving state-owned enterprise management, waste management, sustainable forest management, and supporting renewable energy.
Among the reforms, changes to the Excise Tax Law included raising the minimum excise on tobacco and introducing excise on sugary products and non-alcoholic drinks. Additionally, Montenegro has increased the frequency of reviewing its Positive Drug List to reduce healthcare costs.
The establishment of an independent Fiscal Council to oversee fiscal rules and assess the sustainability of fiscal policy was also a prerequisite. A register of state-owned enterprises has been created to provide detailed financial performance information.
Montenegro has introduced a new Waste Management Law, promoting extended producer responsibility and banning certain single-use plastic products. A new Forest Law aims to enhance sustainable forest management and support the timber industry. Stronger support for renewable energy has been shown through the adoption of a law to facilitate renewable energy auctions.
These conditions met by Montenegro are crucial for the World Bank’s broader program to strengthen fiscal sustainability and sustainable development in the country. Minister Vuković also mentioned support from the French Development Agency (AFD) and the OPEC Fund for International Development, with negotiations for loans of €50 million each nearing completion, expected to be signed soon.
