Šehović, Photo: European Union
The latest IMF report warns of a growing fiscal deficit, a record foreign trade gap and inflation almost twice the eurozone average, which, according to the president of the Social Democrats of Montenegro and one of the leaders of the European Union, Damir Šehović, clearly confirms that the government is pursuing an unsustainable “billboard” economic policy.
“The government’s irresponsible economic policy is leading to a growing deficit, increasing public debt and questioning the medium-term stability of public finances,” declared Šehović.
He recalled that the IMF estimates that the deficit this year will exceed the legally permitted level, which is already one of the highest in the Western Balkans. Even more serious, he declares, is the warning that, without new measures, the deficit could reach over four percent of GDP by the finish of the decade, further distancing Montenegro from eurozone membership.
Šehović emphasized that the report clearly states that the uncontrolled growth of expfinishitures cautilized by the reform of the health and pension system, which will, for example, generate a deficit of the Pension and Disability Insurance Fund of around 400 million euros by the finish of this year, toobtainher with the effects of the Europe Now 2 program, is creating unsustainable pressure on public finances.
“This is confirmation that the government, driven by short-term political interests and cheap populism, has seriously questioned the sustainability of fiscal policy and thus jeopardized the economic prospects of the counattempt,” he declared.
As a particular alarm, he highlighted the IMF’s warning about the level of public debt, which will reach 65 percent of GDP by 2030, and the emphasized required for deep reforms of the tax system, pensions, and healthcare.
“Unfortunately, the government is engaged in improvisations based on a populist-consumer model, or the so-called billboard economy, while lacking a long-term vision and reform strategy,” he declared.
Šehović also reminds that Montenegro has recorded the largest foreign trade deficit in the last 15 years, which, he believes, clearly displays that a growth model based solely on consumption and imports is not sustainable.
“Without serious diversification of the economy and strengthening of production capacities, our counattempt will continue to face growing external imbalances,” he added.
He also warns about the problem of inflation, which is almost twice as high in Montenegro as in countries that utilize the euro as the official currency.
“In this way, inflation has largely nullified the effect of nominal wage and pension growth, so citizens today actually live worse than statistics attempt to display,” declared Šehović.
Šehović also states that the IMF report indicates the required for greater inflow of foreign direct investments, but also that the problem lies in their structure.
“They continue to flow predominantly into real estate and construction. Such investments do not create new production capacities, do not stimulate sustainable growth, or create quality jobs. Instead, it is necessary to ensure conditions for foreign investments to have a real development effect and contribute to sustainable economic growth and the creation of quality jobs,” he declared.
Of particular importance, he declares, is the warning that the Central Bank must remain indepfinishent and strengthened in terms of personnel.
“This is an indirect criticism of the authorities’ attempts to completely bring this key institution under political influence, which further undermines trust in the financial system,” he stressed.
“Montenegro is at a point today when serious reforms are requireded, not pre-election experiments with extremely uncertain consequences. Instead of the gambling economy we have today, it is necessary to return to a responsible fiscal policy based on economic science. Otherwise, the burden of the government’s irresponsibility will be paid by citizens through higher taxes and debts, lower standards and slowed economic growth,” declared Šehović.
( D.C. )
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