IMF and World Bank support Montenegro's fiscal reforms

Washington, DC, the USA (20 April 2013) – On the sidelines of 2013 Spring Meetings of the IMF and the World Bank in Washington, DC, Montenegrin delegation, headed by Finance Minister Radoje Žugić and Governor of the Central Bank of Montenegro Milojica Dakić, met with Executive Director of the IMF’s Netherlands Constituency Menno Snel, Executive Director of Netherlands Constituency in the World Bank Frank Heemskerk, and Assistant Director of Monetary and Capital Markets Department in the IMF Robert Rennhack.

At the meeting with Mr Snel, Governor Dakić presented the most important macroeconomic trends in the first quarter and pointed out that, in that period, Montenegro experienced an economic recovery, adding that the banking system, through new loan activities and high level of stability, made a significant contribution in that regard.

Minister Žugić informed the IMF and the World Bank's officials about the results of the fiscal reforms and plans for the coming period, including an increase in the VAT rate from 17% to 19%. Mr Snel supported Montenegro’s fiscal reforms, particularly the increase in the VAT rate, concluding it is a difficult but absolutely necessary measure.

Minister Žugić thanked the World Bank for lending financial assistance to Montenegro, which means the support for strengthening fiscal, financial and macroeconomic stability. He referred to the results of the analysis on the VAT increase, made by the World Bank, the Central Bank and the Finance Ministry of Montenegro, which show that the benefits of such a decision exceed the potential negative effects.

Montenegro’ banking sector is characterised by liquidity, solvency, new loan activities and falling interest rates, the Central Bank’s Governor said. He also stressed the need for further cooperation and technical assistance for testing contingency plans and bad credits. Mr Heemskerk welcomed the implementations of the tough decisions, including the increase in the VAT rate and resolving the issue of the Aluminium Plant in Podgorca, adding that the consistency in pursuing economic policy is more important that the speed.