The State Audit Institution of Montenegro has released a negative compliance opinion regarding the government’s final budget accounts for 2025, citing significant weaknesses in Treasury accounting, expenditure controls, and the execution of prior audit recommendations. This assessment included a qualified opinion on the financial statements.
Auditors reported a modified cash deficit of €320.53 million, an increase from the initially reported cash deficit of €313.68 million. Following adjustments made during the audit process, the cash deficit was recalibrated to €306.32 million, highlighting the impact of accounting classifications and previously unrecorded transactions on the overall fiscal situation.
The government had initially declared revenues of approximately €2.87 billion against expenditures of around €3.19 billion. The audit uncovered about €7.76 million in previously unrecorded revenue linked to state-owned entities Monteput and Airports of Montenegro.
These findings are particularly critical as Montenegro embarks on a phase of substantial infrastructure investment and sovereign refinancing, where the integrity of fiscal reporting becomes increasingly vital for lenders and investors. The negative opinion from the audit pertains to compliance with legal frameworks rather than a complete rejection of the financial accounts.
A broader concern raised by auditors is the lack of institutional follow-through; only 10.17% of recommendations from previous audits were fully implemented, while 61.02% were left unaddressed. This trend indicates that many identified weaknesses are systemic rather than isolated issues.
For international financial institutions, commercial lenders, and credit rating agencies, effective public finance management is crucial as Montenegro increasingly blends sovereign borrowing with EU grants and infrastructure financing supported by international financial institutions. Insufficient expenditure controls may lead to escalated project costs, payment delays, and unpredictable budget outcomes.
This audit arrives at a time when Montenegro is formulating its fiscal framework for 2027 amidst pressures from wage reforms, pension initiatives, and an expanding capital budget. While robust revenue collection in 2026 has provided some financial flexibility, the rising permanent expenditures necessitate reliable budget reporting.
The immediate challenge for policymakers lies not only in reducing the deficit but also in enhancing Treasury oversight, ensuring accurate recording of transactions involving state-owned enterprises, and expediting the implementation of audit recommendations to bolster confidence in managing complex public finances.
