Response of Ministry of Finance to news content of daily newspaper “Vijesti”

Podgorica, Montenegro (25 December 2017) -- On the occasion of the programme content published on 25 December 2017 in the daily newspaper “Vijesti” on page 5, the Ministry of Finance announces the following for the purpose of complete and truthful public information:

It is a false claim that it is a “makeup of public debt and GDP” or any “miracle”. The projection of public debt and GDP is given in the Draft of the Economic Reform Programme for the period 2018-2020, which was published on 14 December 2017 on the portal of the Government of Montenegro (http://www.gov.me/vijesti/179581/Nacrt-Programa-ekonomskih-reformi-za-Crnu-Goru-za-period-2018-2020-godina.html).

Contrary to what is claimed, projections of the movement of the budget deficit and public debt contained in the Draft of the Economic Reform Programme for the period 2018-2020, as well as the movement of GDP by 2020, are based on medium-terms measures of fiscal consolidation of the Government of Montenegro, which have already yielded good results in 2017. They are also based on the strong growth of GDP in 2017, which is an additional evidence of the balanced fiscal consolidation measures that did not slow down economic growth and that contributed to the slowdown in the growth of public debt.

Although the public debate on the Draft of the Economic Reform Programme for the period 2018-2020 is ongoing, the Government of Montenegro is inappropriately accused of “disagreement” between the projections of public debt movement in the Economic Reform Programme for the period 2018-2020. In order to appropriately and thoroughly inform the public, we emphasise that it is not a matter of any “mismatch”, but the projections are based on a different initial state at the time they were made. In particular, there are three key reasons for this.

The first is that a faster growth of GDP is expected in the projections given in the Economic Reform Programme for the period 2018-2020 compared to the Economic Reform Programme for the period 2017-2019. GDP is nominally higher by about EUR 274 million in 2017, about EUR 220 million in 2018 and about EUR 213 million in 2019. Consequently, the share of public debt in GDP is reduced.

The second reason is that the amount of the missing funds in the budget has been reduced. Namely, the Draft of the Economic Reform Programme for the period 2018-2020 contains a package of medium-term fiscal consolidation measures covered by the Government’s Fiscal Strategy, which are not included in the Economic Reform Programme for the period 2017-2019. These measures contributed to reducing the central budget for 2017 compared to the plan in the Economic Reform Programme 2017-2019. In accordance with the above, a mid-term projection of budget revenues and expenditures was made in the ERP 2018-2020, which implies a faster reduction of the budget deficit, and which reduces the need to provide additional funding for the budget. In particular, as can be seen in the tables attached to the Draft of the Economic Reform Programme 2018-2020, the amount of the missing funds was reduced by EUR 85 million in 2017, EUR 120.4 million in 2018 and EUR 147 million in 2019, compared to the projections in the Economic Reform Programme 2017-2019.

Additionally, the Economic Reform Programme 2018-2020 is designed to withdraw funds from the loan for the purpose of financing infrastructure projects to a slightly smaller extent, in line with the experience of withdrawing funds from loans in previous years.

Therefore, when comparing the data in the two programmes, we can conclude that the main reason for the so-called “disagreement” in the projection is the reduced amount of missing funds, which is a positive factor in the impact on debt developments, compared to last year’s projections, as well as slightly lower volume of withdrawal of funds from the loan.

Finally, the claim of “Vijesti” of the “symbolic number” of the debt of public enterprises in public debt is a flat-rate, since the public debt in the Economic Reform Programme (for 2017 and 2018) is calculated according to the EDP methodology, which is in line with the European Commission, according to which the debt of the railway companies in not included in the public debt. Certainly, the Ministry of Finance announces debt status data, including the debt of railway companies, in its quarterly state debt reports, as well as in its annual public debt reports. The above data will be published in accordance with the Law on Budget and Fiscal Responsibility by the end of March next year.