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NewsMontenegro, Strong real sector is equivalent to stable public finances

Montenegro, Strong real sector is equivalent to stable public finances

Montenegro can have stable public finances only with a healthy and strong real sector, because without a strong economy and new jobs, but not in the public sector, no progress can be expected, said economic analyst Mirza Mulešković.

– You cannot expect stable public finances, nor an increase in wages in the public sector if you do not have a strong economy, and at the moment the fact is that we do not have a strong economy. Without a strong economy and the creation of new jobs, but not in the public sector but in the economy, we cannot expect any progress and sustainability of public finances – Mulešković told Pobjeda.

He added that in order to create new jobs in the real sector, a predictable, attractive and attractive business environment is necessary, which will provide stability to all investors who want to create new jobs.

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– The fact is that this is not the case with Montenegro and that we have a very unpredictable business environment that significantly hinders the creation of new jobs and prevents new investors from coming and opening new jobs in Montenegro – said Mulešković and warned that frequent changes in legislation lead to the fact that there are fewer and fewer healthy companies that want to work in Montenegro.

The Ministry of Finance expects this year’s planned deficit of current budget spending to be significantly lower than planned, primarily as a result of higher revenue collection than planned. At the beginning of this year, as well as last year, there was a better collection of income than planned, which, as announced by the Ministry, is a consequence of the increase in value-added tax (VAT) income and the collection of income from the economic citizenship project.

Mulešković believes that the increased income is largely a consequence of better VAT collection, which, as he points out, is a consequence of inflation and increased consumption.

He warned that, despite the increased revenues at the beginning of the year, the state will still not be able to close the current financial year without additional borrowing, and that stable public finances can only be expected when we have a strong real sector that will create new jobs, for which requires a predictable, attractive and attractive business environment, which Montenegro currently does not have.
The Ministry of Finance stated that due to the conservatism in budget revenue and expenditure planning, they expect the budget spending deficit to be significantly lower than planned, primarily as a result of higher revenue collection than planned.

– On the other hand, the planned expenditure levels represent the upper limits, and savings are expected in that part as well, which will contribute to a better budget balance than planned – said the Ministry of Finance.

The original budget revenues are planned in the total amount of EUR 2.14 billion or 34.8 percent of the estimated gross domestic product (GDP), which is EUR 137 million more than the revenues collected last year. On the other hand, current budget spending is planned at the level of EUR 2.26 billion, which indicates that in the case of achieving the planned income and expenditure levels, a deficit of current budget spending will be realized.

The Ministry believes that it will not be a problem for the Government to pay all increased wages in the public sector and social and other benefits this year.

– The increase in wages, as well as expenditures for social and other benefits, and their harmonization in accordance with positive regulations, are planned by the Budget Law for this year and will be settled regularly – said the Ministry of Finance.

According to the data of that government department, budget revenues in the first two months of this year amounted to EUR 312 million or 5.1% of the estimated GDP and were EUR 31.1 million or 11.1% higher than planned, while 79.6 million EUR or 34.2% higher than the comparable period last year.

– The biggest growth was recorded in income based on value added tax, which is a continuation of trends from the previous year and other income due to the one-time collection of income accumulated during the implementation of the economic citizenship project. The implementation of the Law on the Reprogramming of Tax Claims contributed to higher revenue collection, as well as the beginning of the implementation of a set of tax laws expanding the tax base that were recently adopted – announced the Ministry of Finance.

Mulešković said that the results of increased revenues at the beginning of this year and last year were the dominant result of rising prices and increased household consumption, which led to increased revenues from VAT, while the electronic fiscalization system, which was implemented last year, led to increased tax disciplines. However, he believes that Montenegro will not be able to complete this year with such public finances without additional borrowing, and that in the amount projected in the budget.

The budget law defines that the government can borrow EUR 600 million this year, and last month it already borrowed EUR 100 million from Deutsche Bank to finance budget obligations in the current year.

– I hope that we will not have to borrow more than that, because even since the adoption of the budget there have been certain changes regarding the cost side. The revenue side somehow only added an additional burden on the economy and nothing else has been done about it, because I don’t see much being done in terms of suppressing the informal economy, which is somewhere the first measure that the government should do in order to collect new revenues and expand the tax base obligee – said Mulesković.

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