Press release from 17th Cabinet session

The Montenegrin Cabinet, at the 17th session held on 30 March 2021, chaired by Prime Minister Zdravko Krivokapić, adopted the Draft Law on Budget for 2021, which envisages the total amount of revenues and expenditures of EUR 2,455.79 million. The main goal of the proposed Law is to create conditions for faster economic recovery, while stabilising public finances as one of the main preconditions for overall economic sustainability.

The strong impact of the COVID-19 pandemic on the Montenegrin economy in conditions of high dependence on tourism and simultaneous closure of state borders during the summer tourist season led to a real decline in GDP of 15.2%, a budget deficit of 10,1% and accelerated the growth of the already high public debt to the level of 105.1% in 2020. The depth of the economic crisis and the weak economic diversification required the implementation of decisive fiscal adjustment measures to ensure a reduction in the budget deficit and public debt, and to support economic growth. At the same time, in order to achieve savings and increase the transparency of spending public funds, for the first time, programme budgeting has been fully implemented while drafting the budget.

The original budget revenues for 2021 are planned in the amount of EUR 1,880.2 million or 40.6% of the estimated GDP (EUR 4,636.6 million) and compared to 2020 they are higher by EUR 240.9 million or 14 ,7%. The growth of budget revenues is determined by the projected growth of economic activity and the implementation of fiscal adjustment measures aimed at creating conditions for increasing budget revenues in the coming period, which are:

- increase of budget revenues based on taxation of undeclared property;
- suppression of the informal economy through the improvement of the work of inspection services and full implementation of electronic fiscalization of cash registers, which contributes to the expansion of the tax base;
- introduction of labeling of mineral oils and their derivatives, which suppresses the illegal trade of petroleum products, improves the quality of derivatives on the market while increasing budget revenues;
- abolition of the maximum annual contribution base;
- The decision of the Government will require the government representatives in majority state-owned enterprises and subsidiaries to vote for the distribution of net profit from the previous year and the payment of funds to the budget in accordance with the ownership interest;
- In order to combat the negative effects that the use of tobacco products, alcoholic beverages and products with added sugar have on the health of citizens, as well as the need to further harmonize the rate of excise duty on cigarettes with the requirements of Montenegro's accession to the European Union, and the need to increase budget revenues, changes in excise policy are planned. In this regard, it is planned to increase excise duties on tobacco and tobacco products, excise duties on alcohol and alcoholic beverages, excise duties on carbonated beverages with added sugar, as well as to introduce excise duties on sugar, cocoa and ice cream products.
- It is also planned to reduce the VAT rate on eggs as a basic foodstuff from 21% to 7%.

Total budget expenditures are planned in the amount of EUR 2,019.3 million or 43.6% of GDP and are lower by EUR 45.3 million or 2.2% compared to 2020. The Current budget expenditures are planned in the amount of EUR 1,815.8 million or 39.2% of GDP, while the Capital Budget is planned in the amount of EUR 203.5 million or 4.4% of GDP.

Compared to 2020, it is proposed to reduce discretionary expenditures to the level of ensuring the functioning of spending units and the implementation of activities that improve the provision of public services and create new value.

At the same time, allocations for gross salaries, pensions and social welfare benefits have not been reduced, but these categories will increase in 2021 as a result of the planned harmonization in accordance with the legal framework governing these rights.

Fiscal adjustment on the spending side is higher than mentioned, bearing in mind the planned implementation of new policies that improve the standard of living of vulnerable categories of society, on the one hand, and create conditions for the implementation of development projects, on the other hand.

The Draft Decision on Borrowing of Montenegro for 2021 has also been adopted. The proposed decision defines specific credit arrangements that will be concluded in accordance with the Law on Budget for 2021, which projects that the missing funds for financing the budget in 2021 will amount to EUR 575,600,000.00.

The Cabinet adopted the Draft Law on Amendments to the Law on Budget and Fiscal Responsibility. Amendments to the Law are proposed in order to switch to program budgeting and introduce performance indicator in the annual budget law.

The Draft Law on the Final Account of the Budget of Montenegro for 2019 has been adopted. According to preliminary data from the Statistical Office in 2019, it is estimated that the nominal GDP was EUR 4,907.9 million. Planned budget revenues for 2019 were EUR 2,210.45 million, and they amounted to EUR 2,904.51 million, which is 31.40% more than planned, or 0.67% more than in 2018.

Planned public expenditure for 2019 amounted to EUR 2,384.02 million, and the rebalance has increased it to EUR 2,390.45 million, which is 4.85% less than in the previous year (EUR 2,512.27 million). Public expenditure was EUR 2,593.17 million or 8.48% more than planned. The planned capital budget for 2019 amounted to EUR 305.10 million, which is 12.76% of the total planned funds. The capital budget was realized in the total amount of EUR 272.38 million or 89.28%.

Total public debt of Montenegro, as of 31 December 2019, amounts to EUR 3,789.26 million, or 77.21% of preliminary estimate for GDP. Taking into account the deposits of the Ministry of Finance (including 38,477 ounces of gold), which, at the end of 2019, amounted to EUR 597.13 million, the net public debt of Montenegro, as of 31 December 2019, amounts to EUR 3,192.14 million, or 65.04% of GDP.

The Cabinet adopted the Work Programme of the Government of Montenegro for 2021, which plans a total of 350 obligations. The basis for the preparation of the Programme is, first of all, the Prime Minister's Inaugural Speech adopted by the Parliament, economic policy measures for the current year, obligations arising from laws, strategic documents, international obligations and obligations from the process of accession to the European Union for 2021.

For the first time, the public was involved in the process of preparing the Government's Work Programme, which with its proposals and suggestions contributed not only to improving the quality of this document, but also to determining the future activities of the Government. This shows transparency and openness to citizens aimed at encouraging discussion on key priorities and directions of public policy development.

Also, for the first time, the Government's Annual Work Programme defines the goals to be pursued in 2021, which clearly indicates the Government's commitment to result-oriented policy, and based on measurable data. Each priority is given equal attention and a set of objective, realistic and achievable goals are developed for each priority over a one-year period, fully taking into account the challenges posed by the Covid-19 pandemic.

In addition to the goals, measurable indicators are defined, as indicators of progress and success in the implementation of the set goals. Thus, for the first time, the basic principles of planning are transferred to the Government's Work Programme, which will now be a document with clearly defined directions of action over a one-year period. In this way, it is possible for the public to monitor the achievement of results, which increases the transparency of the work of the Government, but also the responsibility in the work of public administration.

The Programme defines the key priorities of the Government:

1. The rule of law and equal opportunities, which bring together key policies for the development of the area in which each democratic country rests.
2. Healthy finances and economic development which will create stable finances and sustainable economy.
3. Health and a healthy environment are imposed as one of the key priorities in a situation in which our health is endangered and the Covid-19 pandemic does not bypass Montenegro either.
4. Education and society based on knowledge as the fourth priority is based on education focused on creativity and talent recognition, sports development of children and youth.
5. Digital transformation as one of the strategic priorities is a driver of innovation, modernization, competitiveness and comprehensive socio-economic development.
Montenegro - a future member of the European Union. The Government is firmly committed to Montenegro becoming the next member of the European Union. Therefore, it is necessary to observe all planned activities through the prism of Montenegro's accession to the European Union.

The Programme of Accession of Montenegro to the European Union for the period 2021–2023 was adopted. The Programme is a strategic document that includes 33 negotiating chapters in a tabular presentation. As the acquis communautaire is constantly changing and evolving, and given the dynamics of the negotiation process, the Accession Programme adapts annually to changes in the process of developing EU law. Therefore, the drafting of the Programme of Accession of Montenegro to the European Union for the period 2021–2023 started in order to harmonize this document with the new acquis communautaire, but also with the dynamics of the adoption of national legislative and strategic documents.