Montenegro has introduced changes to its budget oversight framework as public spending pressures increase, with a revised Law on Budget and Fiscal Responsibility adopted in August and the newly established Fiscal Council becoming operational in September.
The revised legislation incorporates key elements required under EU rules governing national budgetary frameworks. The Fiscal Council was established at the end of July, strengthening the institutional structure responsible for fiscal oversight.
The changes come as the government has increased its 2026 budget deficit target to 3.7% of GDP, from 3.3%. Capital expenditure is rising rapidly, while interest costs increased by more than 20% year on year during the first eight months.
Public debt is also expected to rise temporarily as the state builds up deposits ahead of the 2027 Eurobond repayment.
The Fiscal Council’s role is to scrutinise budget assumptions, medium-term fiscal projections and compliance with fiscal rules. Its establishment does not remove the pressures on public finances, while a higher deficit may also reflect spending on productive infrastructure. Fiscal oversight is particularly relevant in Montenegro’s euroised economy, where domestic fiscal policy represents one of the main instruments available for economic stabilisation.
The reform also has implications for sovereign financing. Investors and international lenders assess not only headline debt ratios but also the credibility of budgetary institutions, the quality of fiscal reporting and the reliability of medium-term planning. Montenegro’s sovereign credit rating upgrades in September indicate that institutional reforms and convergence with EU standards form part of the country’s credit assessment.
The government must balance infrastructure financing with social and wage pressures, the maintenance of existing assets and preparations for sovereign debt maturities. The Fiscal Council is expected to strengthen transparency around these fiscal choices and the relationship between borrowing, public expenditure and long-term economic capacity.
