The European Commission has called on Montenegro to strengthen control over current public spending, reduce fiscal privileges and improve oversight of state-owned enterprises as the country prepares its Economic Reform Programme for 2027–2029.
Recommendations to guide next reform programme
The Commission’s recommendations will form the basis of Montenegro’s next Economic Reform Programme, which must be submitted to the European Commission by 15 January 2027 following domestic consultations and a public debate. A central recommendation is stronger management of recurring government expenditure. Although Montenegro has benefited from strong nominal economic growth, increased tourism revenues and higher household consumption, the Commission noted that long-term commitments involving public-sector wages, pensions, social transfers and public institutions can become difficult to reverse if economic growth slows.
The recommendations do not call for a reduction in public investment. Instead, they aim to prevent expanding current expenditure from limiting resources available for infrastructure, environmental compliance, education, healthcare and EU accession reforms.
Independent Fiscal Council remains a priority
The Commission has also reiterated the need for a fully operational Fiscal Council. An independent Fiscal Council would assess the government’s budget assumptions, monitor compliance with fiscal rules and evaluate the realism of official macroeconomic and fiscal projections.
The institution is considered particularly important because Montenegro uses the euro without being a member of the euro area, meaning it cannot rely on an independent national currency or conventional central-bank financing during periods of fiscal stress. Under these circumstances, confidence in fiscal policy depends on government credibility, disciplined debt management and continued access to external financing.
Review of tax expenditures
The recommendations also address tax expenditures, including tax exemptions, reduced tax rates, investment incentives and other measures that narrow the tax base without appearing as direct budget expenditure.
While tax incentives can support investment, tourism and employment, the Commission noted that they may also create unequal treatment and increase lobbying risks. Where economic benefits are not clearly demonstrated, tax exemptions can have effects similar to public expenditure while receiving less parliamentary and public scrutiny.
Greater oversight of state-owned enterprises
The Commission also highlighted the importance of strengthening governance of state-owned enterprises, reflecting Montenegro’s continued public ownership in sectors including energy, transport, aviation, railways and other strategic services. Major companies such as EPCG, Airports of Montenegro, together with railway companies and infrastructure operators, can affect public finances through their borrowing, government guarantees, financial performance and capital investment decisions.
According to the recommendations, establishing a centralised ownership and monitoring framework would enable the government to compare company performance, introduce common reporting standards and identify fiscal risks before they become more significant. At present, responsibility for supervising state-owned enterprises is frequently divided among line ministries, company boards and management teams, making consolidated oversight more difficult.
Focus on governance rather than ownership
The Commission’s recommendations do not call for the privatisation of state-owned enterprises. Instead, they focus on ensuring that public ownership is exercised through professional management, transparent governance and decision-making that is separate from short-term political considerations.
Improved corporate governance could also strengthen access to financing. Banks and international financial institutions assess factors including board independence, procurement procedures, audited financial statements and the relationship between companies and the state when evaluating financing requests. Weak governance structures can increase financing costs even where companies remain commercially viable.
EU accession increases reform expectations
The recommendations are also linked to Montenegro’s European Union accession process. As accession progresses, the country will face closer scrutiny of fiscal reporting, state aid control and corporate governance. State-owned companies operating in competitive markets will increasingly be expected to demonstrate that they do not benefit from hidden advantages or accumulate liabilities that could later become obligations for taxpayers.
Institutional reforms accompany economic policy
The Commission’s assessment indicates that Montenegro’s economic programme will be evaluated not only on the basis of its growth projections, but also on the strength of the institutional framework supporting fiscal policy.
While improvements in employment, tourism and infrastructure investment may strengthen economic performance, the recommendations emphasise the continued importance of transparent public spending, effective fiscal oversight and credible management of risks associated with the state-owned sector. As Montenegro moves closer to EU membership, the Commission expects the country to establish fiscal institutions and governance standards consistent with those of EU member states, reducing reliance on short-term revenue growth and informal management of publicly owned assets.
