Tuesday, May 28, 2024
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Balancing fiscal stability and growth: Montenegro’s financial strategy

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The government has announced that it won’t take on new debt for its day-to-day spending this year, nor does it plan to issue bonds for that purpose, as stated by Finance Minister Novica Vuković in an interview with Pobjeda.

“We won’t be using loans to cover any new expenses, except for those related to the capital budget, adhering to the fundamental budgeting principle that all ongoing obligations should be covered by current revenues,” Vuković affirmed.

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He reminded that the Budget Law allows for borrowing up to 1.15 billion euros.

“The proceeds from the bond issuance in March this year, totaling 687.76 million euros, will be allocated for debt repayment and the capital budget in 2024. Additionally, a fiscal reserve will be established to cover part of the debt due next year. While the law allows for a remaining arrangement of 462 million euros, it doesn’t necessarily mean we’ll utilize the entire sum. The decision will depend on various factors,” explained Vuković.

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Vuković emphasized that the Ministry of Finance is diligently monitoring both international and domestic market dynamics and will make timely decisions based on favorable conditions.

“With a budget deficit of 3.35% of GDP planned for this year, current trends suggest that we may achieve a lower deficit than anticipated. Consequently, there will be reduced borrowing needs and more effective management of public debt,” he noted.

Furthermore, Vuković disclosed ongoing negotiations between the Ministry of Finance and the World Bank for a Development Policy Loan (DPL) agreement worth up to 80 million euros. This loan would provide additional funding for the budget and establish a fiscal reserve.

“Interest in this arrangement has been expressed by agencies and funds willing to provide additional funding under more favorable conditions, potentially securing up to 180 million euros through this mechanism,” added Vuković. He also underscored the significance of substantial non-repayable funds approved or anticipated from the EU, particularly grants for railway and highway reconstruction and funds from the Western Balkans Growth Plan, which are crucial for government initiatives.

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