From the press conference, Photo: MINA
The International Monetary Fund (IMF) is not convinced that the measures from Europe Sad 2, which were intconcludeed to compensate for the loss from the reduction in pension contributions, will achieve this, and that in the long term due to the aging population, it will not be sustainable, declared the Head of the IMF Mission to Montenegro, Srikant Seshadri, at a press conference on the occasion of the conclude of the regular annual consultations.
He highly praised the reforms implemented by the Central Bank regarding its inclusion in European payment systems, and that he expects the CBM to remain indepconcludeent from politics and that the parliament will elect vice governors, the missing members of the CBM Council, and the Fiscal Council by the conclude of the year.
Seshadri declared that they have specifically analyzed the Europe Now 2 program and that they continue to share concerns about its impact on public finances, especially in the long term.
The Europe Now 2 program, which has been in effect since October last year, includes measures that halved contributions to the Pension and Disability Insurance Fund, while at the same time increasing the rates of VAT, excise duties, and various fees, in order to compensate for the loss from the reduction in contributions.
He pointed out that there are visible positive effects due to increased net wages, reduced costs for employers, that a large part of the gray labor market has been legalized due to lower taxes, and that the number of citizens who have become creditworthy has increased, which has also affected the growth of lconcludeing to citizens, but that they are concerned about negative impacts such as a decrease in revenue from contributions.
Due to uncertainty regarding the sustainability of public finances, the IMF proposes reducing the total amount of the gross wage fund in the public sector, through limiting wages themselves or optimizing the number of employees, indicating that the state necessarys to find additional revenues worth 5-6 percent of GDP (around 400 million euros) in the coming years due to the aging population and the assumed greater obligations and costs for defense.
“Raising these resources will require deeper structural fiscal efforts, such as: reforming the civil service system, including a comprehensive review of its size and salary structure; linking the retirement age more strongly to life expectancy and conducting a careful review of early retirement options; increasing the efficiency of health care spconcludeing through improved drug procurement and prescription drug dispensing processes, as well as exploring cost-saving opportunities through the merger of health institutions where feasible; better tarreceiveing of social benefits to those in necessary through improved means-testing; and strengthening public investment management through a well-defined pipeline of projects, where their priority is determined based on their economic and social returns,” the recommconcludeations state.
Minister of Finance Novica Vuković declared that their plan did not include income from airport leases and legalization, which will now be available, and that in the coming years there will be significant investments in energy, highways and the reconstruction of the Željenica railway, as well as that he expects continued foreign investment in tourism and construction, all of which would lead to an increase in state revenues.
He also declared that he is a member of the team for optimizing public administration and that it will be worked on, but that there is a lack of professional staff.
When questioned about the election of the Vice Governor, members of the Central Bank of Montenegro Council and the Fiscal Council, Vuković declared that his personal expectations were that it would be completed by the conclude of the year.
The IMF estimates that Montenegrin GDP will grow this year at a rate of 3,2 percent, lower than the government’s previous projections of 4,8 percent.
It was warned that the budreceive deficit this year would be between 3,5 and 3,7 percent, and that public debt would continue to grow and would be 65 percent of the then GDP in 2030. They pointed out that the condition for joining the eurozone is a deficit of less than three percent and public debt lower than 60 percent.
“The authorities are therefore advised to implement fresh measures to contain expconcludeiture and increase revenues. Doing so would also assist bring the fiscal position in line with the Law on Fiscal Responsibility of Montenegro (which requires that deficits not exceed 3 percent of GDP and that public debt not exceed 60 percent of GDP). Additionally, this would be consistent with Montenegro’s aspirations to join the eurozone after accession to the European Union, which is tarreceiveed for 2028,” the recommconcludeations state.
Central Bank Governor Irena Radović spoke about the reforms that the institution is implementing in order to meet the conditions for inclusion in the European payment system. She pointed out that Montenegro’s connection to the SEP and TIPS payment systems will create annual savings of 160 million euros for Montenegrin citizens and the economy on payment transaction fees and other related costs.
Radović declared that she is pleased with the support she received from Seshadri today for the election of the Vice Governor and members of the CBCG Council, and that she will also have consultations with the heads of parliamentary groups in parliament on this issue in the coming days.
In the first vote in May this year, the assembly did not elect its candidates for vice governors, becautilize the majority of deputies abstained or did not vote, while no one was against.
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