Montenegro’s cabinet spending to drop by 5.7% y/y to EUR 1.99bn in 2017

The Montenegrin government has approved the 2017 budget draft, which envisages 5.7% y/y decline in spending to EUR 1.99bn from around EUR 2.11bn in the 2016 budget plan, Finance Minister Darko Radunovic announced over the weekend. The minister noted that the planned spending will be by EUR 25mn less compared to that in the revised budget for 2016. The cabinet spending will fall mostly on the back of lower debt servicing costs (44.0% y/y at EUR 220mn) and lower capital expenditures (16.5% y/y at EUR 263mn), Radunovic said. He also said that current spending will grow by 11.8% y/y to EUR 863mn and the budget of the state funds will be higher by 2.1% y/y at EUR 639mn. Radunovic said that the increase in current spending will be mostly on the back of last year's public wage hike and the introduction of benefits for mothers with three or more children. Still, the government plans to reduce those benefits this year and cut public wages compared to last year, although their level will still be higher compared to that before last year's salary hike.

Radunovic also said that the growing public debt remains a major concern for the public finances. He noted that the public debt will amount to 66.5% of GDP at end-2016 and grow further until peaking at 79.5% of GDP in 2019. The minister expects the public debt to start declining from 2019 onwards to reach 74.1% of GDP in 2021 but said that cutting the public debt level will pose a serious challenge for the government in the long term. Radunovic also disclosed that the government will borrow EUR 455mn in 2017, of which EUR 221mn will go for debt servicing, EUR 200mn will go for capital projects and EUR 34mn will be used to bolster the fiscal reserves. He added that the current expenditures in the 2017 budget draft will be entirely financed by the state revenues.

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