Finance Minister Radunović takes part in TV show “Jutarnji program”: Compliments of IMF and WB; application of fiscal consolidation measures towards budget surplus

Podgorica, Montenegro (23 October 2017) -- Minister of Finance Darko Radunović took part in the show “Jutarnji program” broadcast on the Radio and Television of Montenegro earlier this morning.

Minister Radunović expressed satisfaction with the talks that the Montenegrin delegation led last week in Washington during the regular annual session of the International Monetary Fund and the World Bank, saying that our measures have created the assumptions to get support from the World Bank in the amount of 90 million dollars.

“We spoke with the senior management of various financial institutions, and also with representatives of the IMF and the World Bank. They assessed that the results we achieved for the first half of year, and these are available results, are good,” the Minister said, recalling that our economic growth was 5.1 percent in the second quarter and 4.2 percent in the first half of the year, and that our annual economic growth will be above 4 percent.

As the Minister noted, such data indicate that the measures contained in the fiscal consolidation are good and our system is rated as credible, which should create prerequisites for the World Bank support.

“I would be support in the form of a guarantee. With this guarantee, we can enter the financial market and, hopefully, create conditions for some 200 to 230 million of additional funds. The purpose of these funds would be not to increase public debt but to refinance liabilities maturing in 2019, 2020 and 2021,” the Minister said, expressing the hope that such an arrangement will be completed by the end of the year.

Speaking about Montenegro’s improved prospects in ratings of global credit agencies, Minister Radunović said that such assessments are proof that our creditworthiness is good and that doing what we do is credible and this should lead to a reduction in interest rates which should happen early next year, according to the Minister.

Commenting on the issue of public debt, the Finance Minister said that the public debt will enter a downward trend in 2019, and will fall to the expected 64.8 percent in 2020 by applying fiscal consolidation measures. He stressed that it is much more important to get out of the budget deficit.

Answering the question whether the increase in tax and excise rates could jeopardise the competitiveness of the economy and the standard of living, Minister Radunović said that competitiveness will not be compromised and that inflation may rise but not more than 1%. The Minister pointed out that the pensions will be adjusted from January 2018, while the price increase will be at the lowest possible level, that is below 1%.

Commenting on the question of the impact of motorway construction on the public debt, the Minister said that the realisation of EUR 230 million was planned for the next year and that this will not affect the level of public debt.

“For the first time now, the IMF emphasised that such a large infrastructure project, for small countries like Montenegro, has a strong financial impact on the budget in the short term, but it gives very good results for the entire economy in the long run,” the Minister said.

Minister Radunović expressed confidence that the level of foreign investment will be at the minimum of the projected amount in the next year, which is a level of one billion euros.

“We already have contracted deals around this amount so we do not question that... In Montenegro, many projects are being implemented, from the motorway to the hotel and tourist complexes, the power cable, so I think that this billion, which is projected annually over the next three years, that is three billion; I expect it will certainly be realised,” the Minister said

Speaking about budget forecasts for the next year, the Minister said that it is necessary to preserve in applying fiscal consolidation measures.

“If we apply all the measures in full scope with the fine adjustment of structural changes, I think we can have a budget surplus by 2020,” Minister Radunović said, adding that the surplus should be at the level of 4.5 percent of GDP.