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International Monetary Fund: 'Public debt of Montenegro in the red zone'

International Monetary Fund: 'Public debt of Montenegro in the red zone'
 

By Adnan Prekic - Podgorica

The public debt of Montenegro could in the next four years rise to 75 percent of the gross domestic product, according to a new prediction of the International Monetary Fund (World Economic Outlook) for Montenegro. The predictions of this international financial institution are different from the prediction of the government of Montenegro, which estimates that the state debt for year could reach 57% of the GDP and that for 2015 will be the year that it will start to decline. The government of Montenegro expects that the share of the debt in regard to the gross domestic product will decrease due to the economic growth stimulated by large projects such as the tourist resorts in Lustica and Kumboru, the highway construction and the submarine electricity cable to Italy.

The data of the montenegrin government and the International Monetary Fund only agree at the current debt. The state debt at the end of previous year amounted to 1.87 billion euros, or 56 percent of the gross domestic product. At the end of this year the government expects public debt will grow to two billion euros and it would be worth in the primary prediction 56.9% of gross domestic product. The IMF estimates that at the end of this year, the national debt will amount to 58.7 percent of the GDP. But starting next year there is a large difference in the projections, mainly because the IMF does not expect that there will be a strong economic growth of the montenegrin economy.

The government in the primary prediction for  2015 forecasted a decrease of public debt to 55.3% of GDP and in the worst case an increase of up to 59.6%. The IMF on the other hand expects a large growth of the state debt by as much as 63.42 percent. The IMF has previously said it did not agree with the intention of the government of Montenegro to become indebted by 800 million for the highway starting this year until the end of construction.

The basic difference in the projections of the government and that of the International Monetary Fund is the amount of growth of the Montenegrin economy. Large investments in infrastructure and tourism according to the government's expectations would increase the Gross Domestic Product of the country, which will reduce the level of debt. The International Monetary Fund does not see quite such a tremendous growth of the economy. They estimate that the public debt in 2017 will be at 73.22 percent of GDP, while in 2018 it will continue to grow at 75.78 per cent and it is only in 2019 that they expect a slight decline to 75.33 percent.

The lowest state debt Montenegro has had was in 2007 when it amounted to only 27.5 percent of the gross domestic product or 737 million dollars. In just four years after that, in the end of 2011, the state debt had doubled to 1.48 billion, or 46 percent of GDP. At the end of 2012 the government debt stood at $1.7 billion, and in the last year it has increased by another 170 million mostly due to the decline of guarantees for the Aluminum Plant, with 135 million having been paid from the state budget, new charges and higher taxes and austerity measures such as the freezing of pensions.

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