Press release: The 46th Cabinet session – 12 November 2021

The Montenegrin Cabinet, at its 46th session held on 12 November 2021, chaired by Prime Minister Zdravko Krivokapić, adopted the Proposal of the fiscal strategy for the period 2021-2024. Starting from the identified challenges facing Montenegro on the path to sustainable growth and development, and respecting the five principles on which the work of the Government is based ("rule of law and equal opportunities", "healthy finances and economic development", "health and healthy environment" , "education and knowledge-based society" and "digital society"), the proposal defines the strategic goal of Montenegro's economic policy: "achieving smart, sustainable and inclusive economic growth that will contribute to improving the quality of life of all its citizens".

Fiscal policy as the main instrument of economic policy, in the period 2021-2024 will be aimed at creating conditions for macroeconomic stability and fiscal sustainability, in order to ensure the long-term sustainability of Montenegro's public finances after the pandemic and provide full support to economic growth. The effects are reflected in the reduction of public finances in the short term, with continuous growth of budget revenues, optimization of current budget spending and increasing funds for capital projects, which will contribute to achieving dynamic economic growth rates of over 5% on average in the period 2022-2024, as well as employment and wage growth.

Fiscal sustainability is largely determined by tax policy and expenditure management policy. When it comes to the tax policy, the emphasis will be on a comprehensive reform of the tax system in order to expand the tax base, which would create the conditions for generating new sources of income through:

• reducing the tax burden on labor and subsidizing new employment in order to create a basis for job creation and improve the standards of employees, especially those with the lowest incomes;
• introduction of progressive income tax;
• high tax rate on unreported property and confiscation of illegally acquired property;
• changing the excise policy by increasing the amount of excise duties on products that have negative effect on the health of the population and using the revenues generated on that basis to finance the health system;
• implementation of a new legal solution in the field of organizing games of chance and
• reduction of the "grey economy" in order to enable fair market competition, i.e, to suppress unfair competition.

When it comes to managing public spending, the medium-term policy strategy is based on:

• rationalization of "unproductive consumption";
• increasing allocations for capital and development projects whose implementation generates new value and stimulates economic growth and
• optimizing the state administration by creating conditions for reducing the number of employees and responsible management of the salary fund.

The Cabinet adopted the Draft Law on the Budget of Montenegro for 2022. The goals of the budget for 2022 are: sustainable and inclusive growth, increasing the living standard of citizens, improving the business and investment environment, reducing the grey economy, more generous welfare benefits and building new public infrastructure.

The budget for 2022 is based on a GDP projection of 5.3 billion euros, tourism revenue at the 2019 level (1 billion euros) and a full recovery of economic activity at the pre-COVID level. It is planned to increase spending on capital projects, additional increase of salaries for health workers, significant growth in spending on agriculture and the introduction of tax breaks for farmers, as well as increase spending on welfare benefits. The budget plans to implement one of the key government reform programs - EUROPE NOW, which, among other things, envisages an increase in the minimum net salary to 450 and the average to 700 euros, the abolition of health care contributions and fairer taxation.

The Cabinet also adopted the Information on the need to sign Protocol 16 to the Convention for the Protection of Human Rights and Fundamental Freedoms.