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Ask the Government

                               Ask the Government

Response to claims by opposition and media inqueries about budget rebalance

Published date 09.03.2018 20:38 | Author PR Service

Ispis Print


Podgorica, Montenegro (9 March 2018) – Given the numerous misinformation, semi-information and false claims regarding the Draft Law Amending the Budget Law of Montenegro for 2018 and the Decision on Borrowing for 2018 the Government passed on Wednesday, and given the numerous media inquiries requiring the Government and the Ministry of Finance to clarify certain items of the proposed law, for the purpose of providing full and accurate information to the public, we are noting that:

The following claims made by certain media are untrue: that the Government will "borrow another half a billion" and that "the State misses EUR 450 million", the claims made by one opposition politician that the Government will introduce new taxes and reduce salaries and pensions, the claims made by an NGOs that "the Government borrows EUR 940 million out of which it plans to borrow EUR 440 million to patch up holes in the budget" and the claims made by a citizen that the Government "will not be able to continue construction of other sections” of the motorway and modernise the Thermal Power Plant Pljevlja.

The facts are as follows:

1. The Government will not introduce new fiscal consolidation measures other than those identified in the Fiscal Strategy. This has been emphasised on several occasions. There will be no reduction in salaries and pensions. On the contrary, pensions are regularly adjusted, which will be continued. The claims made in connection with this are pure fiction.

2. The remaining sections of the motorway will be built. The interest was expressed by several renowned subjects. Preparatory activities are ongoing in order to continue the construction of the Mateševo-Andrijevica section immediately after the completion of the Smokovac-Uvac-Mateševo priority section. Those claiming that the Government "will not be able to continue construction of other sections" used to claim that the priority section was not going to be built either.

3. The Government will implement the ecological reconstruction of the Thermal Power Plant Pljevlja, which also includes the installing of the heating system in Pljevlja. Pljevlja TTP will continue to supply the citizens of Montenegro with electricity for at least 20 years in line with European regulations and standards. Moreover, all previous activities do not delay the installment of the heating system in Pljevlja.

4. There is no negative consequence of the redemption of two-thirds of shares from A2A and their return under the auspices of the State. Those who are claiming this, used to claim the exact opposite - that the State should buy the A2A shares.

5. Claims implying that Montenegro’s debt is rising are untrue.

Montenegro has expanded space for issuing bonds by 100 million in order to refinance a part of the state debt that is due in the coming years. By doing this, the overall public debt does not increase in the medium term.

This means that part of the existing debt is being replaced more favourably, which is in line with the Government’s medium-term projections set out in the Economic Reform Programme, namely that the public debt from 2020 will be below 60% of GDP. Therefore, the public debt in 2018, 2019 and 2020 in relation to GDP will to be lower than the projections set out in the Government's Fiscal Strategy adopted in July 2017, and Montenegro will achieve longer maturity of debt and reduce the average interest rate on public debt.

This is best evidenced by the fact of the World Bank's stated trust, on the basis of which the guarantee has been awarded for public debt repayment of EUR 250 million -12 years with an interest rate margin of 2.95%. We are under the obligation to plan the above mentioned in the Budget Law by amending it.

With the budget rebalance, the missing funds are increased in 2018 by EUR 25 million or 0.6% of GDP, compared to the existing Budget Law, due to the purchase of a part of the shares of A2A, which represents an increase in the assets of the State of Montenegro, not a debt.

Therefore, all the measures taken by the Government, in line with its Strategy, aim to bring the public debt in 2020 to a level below 60% of GDP. Planned borrowing in 2018 with lower interest rates are aimed at refinancing a more expensive part of the public debt, that is, a reduction rather than an increase in public debt.

6. The answer to the media inquiries about the level of budget revenues collection for this year, and in particular about excise revenues, is as follows:

Collection of the budget revenue in 2018 is doing good, better than last year and even better than our ambitious plan.

In the first two months of 2018, the increase was 16.1% (26.8 million euros) compared to the same period last year, i.e., 6% (≈11 million euros) in relation to the plan.

In the general structure of revenues, the share of revenue growth from excise is satisfactory.

7. Answer to the media inqueries from which donations revenues are expected to arrive, is as follows:

The proposed amendment relates to the planned payment of the first tranche of EUR 4 million of direct support (from the IPA) to the state budget for the implementation of the activities defined by the Action Plan 2018 – 2020 of the Strategy for Public Administration Reform. The payment of funds into the budget is expected in April, which is why it is planned within the amendments to the Budget Law for 2018.

Having determined the budget rebalance, the Government stated that it expects that the activities that were finalised in the past days will result with precisely the same claims by the opposition. It is the right of the opposition, which the citizens of Montenegro have become accustomed to, to make false claims, and the right of the Government is not to be upset but to do what it is its duty to which citizens are also accustomed to, that is, to present facts.

And the facts are as follows: Montenegro will provide savings on interest costs in the medium term through the acquisition of funds under the auspices of the World Bank and the issuance of eurobonds in 2018. These savings are approximate to this year's budget of the Directorate of Public Works and the funds provided by lower debt repayment will enable implementation of new projects in education, science, agriculture, health care, social protection, or investment in development. This is a calculation. The rest is politics.

The level of average salaries in Montenegro - far above those in the region, our economic growth, the improvement of the prospects of our credit rating, our development projects being implemented, our successful fight against the gray economy, the fact that Montenegro is 45% of the European average, well ahead of others in the region, testify to the unfoundedness of the claims made by the opposition.

The Government, of course, is aware that this level of development is not sufficient for the needs of our citizens and everything the Government does is aimed at achieving European standards and quality of life, creating new jobs, increasing salaries and pensions. This is what the Montenegrin citizens see and what has been confirmed from the most heterogeneous and objective international addresses.

PUBLIC RELATIONS SERVICE F THE GOVERNMENT OF MONTENEGRO