Press release of the 2nd session of the 44th Government of Montenegro

At its 2^nd session held today, chaired by Prime Minister MEc Milojko Spajić, the Cabinet adopted the Draft Law on Amendments to the Law on the Budget of Montenegro for 2023. The planned amendments are made in order to achieve technical harmonization with the new Decree on organization and manner of work of the State administration, then due to planning funds needed for implementation of the EU support packages to defuse the energy crisis and for providing the shortage of funds for financing certain budget liabilities until the end of this year, and also due to the increase of revenues.

The original budget revenues amount to 2,422.8 million euros and are higher by 275.3 million compared to the ones envisaged in the Law on Budget. The collection of budget revenues in the previous period of the year was significantly higher compared to the same period last year. A significant part of the budget revenues increase is related to one-time revenues which are not a result of new fiscal policy measures or a more important structural reform which will improve the economy structure and create a new value. It is estimated that the share of one-time revenues will amount to more than 180 million euros, of which the most significant revenues refer to the following:

• Generated revenues based on the hedging arrangement concluded in 2021, for the protection against foreign currency risks of the loan made in dollars for the purpose of the Bar – Boljare Highway construction in the amount 60 million euros;
• Accumulated revenues in the previous period based on implementation of the “Economic citizenship” programme, planned in 2023, in the amount of 75 million euros;
• Planned collection of dividends based on earned profit of state-owned companies in the amount of 40 million euros;
• Collected payments from EU donations in the amount of 27 million euros.

In addition to the above, compared to the same period last year, the higher revenue generation was recorded from the following sources:

• income taxes and contributions, more precisely pension and disability insurance contributions, as a result of decrease of grey economy in labour market (primarily as reduction measures of total tax burden on wages within the Europe Now 1 reform programme) and increase of wages for public sector employees;
• corporate profit tax, due to implementation of progressive tax rate (Europe Now 1) and an enormous growth of economic activity accomplished in 2022;
• value added tax due to economic activity growth stimulated primarily by the growth of consumer spending and inflation. The increase of this type of tax was the outcome of a good tourism season, as well as a significant number of foreign citizens with temporary residence in Montenegro.

Total budget expenditures are planned in the amount of 2,639.1 million euros, which is by 125.3 million euros higher than originally planned. The increase of budget expenditures is proposed due to the lack of funds primarily regarding social and child protection, pension insurance and providing the shortage of funds for financing healthcare system, as follows:

• for the payment of funds based on rights related to social and child protection 23.1 million;
• rights related to pension and disability insurance 32.0 million;
• shortage of funds within the Health Insurance Fund 19.0 million;
• payment of subsidies to the employers who employ persons with disabilities 11.5 million;
• shortage of funds for salaries in the amount of 7.4 million.

In addition, budget deficit in the amount of 216.3 million euros was planned, which is by 125.3 million euros less than envisaged in the Law on the Budget for 2023.

The Cabinet adopted a Draft Decision on amendments to the Decision on the borrowing of Montenegro for 2023. It involves technical amendments for the purpose of harmonization with the Draft Law on Amendments to the Law on Budget of Montenegro for 2023.

The Cabinet was presented the Information on drafts of laws and other acts that were submitted to the Parliament of Montenegro by the 43^rd Government of Montenegro. Given that the Rulebook on Office Operations in the Parliament of Montenegro stipulates that when a term of office ends, all acts in the parliamentary procedure should be archived, the President of the Parliament submitted to the Cabinet a list of draft laws and other acts that were submitted by the Government to the 27^th and 28^th Parliament sittings, which were not discussed. In that regard, the Cabinet decided to withdraw the drafts of the mentioned acts from the procedure, while the relevant ministries, in the event they maintain particular proposals outlined by the 43^rd Government, will prepare such acts in accordance with the Rules of Procedure of the Government and submit them to the Cabinet for consideration and adoption within 15 days.  

Information on development of the Economic Reform Programmes (ERP) for Montenegro for the period 2024 – 2026 was adopted. The Programme is a medium-term strategic document prepared by Montenegro within the dialogue on economic management with the European Union.  The document consists of three main chapters, as follows: macroeconomic framework, fiscal policy framework and the chapter on structural reforms. What is new compared to the last year Programme is that the analysis of the structural reforms is divided into three areas instead of formerly 13 areas, as follows: competitiveness, sustainability and resilience, and human capital and social policies. It is envisaged that the Programme includes maximum six structural reforms measures from the stated areas, that should be developed in the period of not more than three years with specific targets to be achieved every year. The Information, among other things, states that the total number of planned obligations in 2023 was 300, of which to date 77 (or 26%) have been implemented. Within the legislative part, 229 obligations were planned, of which 39 (17%) were implemented, i.e. seven laws and 32 by-laws. Out of 71 planned strategic documents, 38 (54%) were implemented.