Montenegro’s parliament has approved a new Budget and Fiscal Responsibility Law introducing stricter rules for government spending, public debt and medium-term fiscal planning as the country advances toward European Union membership. The law was adopted on 24 August 2026, with 43 MPs voting in favour, after 31 amendments were considered. It is expected to take effect on 1 January 2027, replacing the fiscal framework introduced in 2014.
Under the new legislation, the general-government deficit should not exceed 3% of GDP, while public debt should remain below 60% of GDP.
Medium-term fiscal controls
The new framework introduces stronger medium-term expenditure controls, formal spending reviews, improved public-investment management and a larger role for the Fiscal Council. It also establishes a framework for better management of EU funds as Montenegro prepares for a larger pipeline of EU-supported investments. Montenegro’s public debt has declined significantly from the pandemic period, when it exceeded 100% of GDP. By 2025, the ratio had fallen toward the low-60% range, supported by economic recovery, nominal GDP growth and stronger fiscal revenues.
Investment and debt constraints
Despite the improvement in debt levels, Montenegro continues to face substantial financing requirements. Planned investments include the continuation of the Bar–Boljare motorway, the proposed Adriatic–Ionian corridor, railway modernisation, electricity networks, renewable energy, wastewater infrastructure and airports.
The planned €2.8 billion Adriatic–Ionian corridor illustrates the scale of future infrastructure requirements. The new fiscal framework will make financing sustainability increasingly important alongside engineering and economic assessments. The government will also have to manage relatively rigid expenditure, including pensions, public-sector wages, social transfers and healthcare.
Spending reviews and fiscal oversight
Spending reviews are intended to assess the efficiency of programmes, including subsidies, public administration, social transfers and state-owned enterprises. The strengthened role of the Fiscal Council will provide independent scrutiny of government forecasts, including revenue projections, spending commitments and debt trajectories.
The law allows temporary deviations from the 3% deficit and 60% debt limits during severe economic shocks, natural disasters, security emergencies and other exceptional circumstances, provided medium-term fiscal sustainability is preserved.
2027 budget will be first major test
The first major test of the new framework will be the 2027 budget. The government will have to accommodate public-sector wages and pensions, infrastructure investment, EU accession-related expenditure, healthcare and social obligations while remaining consistent with the new expenditure path.
Montenegro’s revenue base remains heavily dependent on consumption, particularly VAT and import-related revenues, while tourism plays a significant role in generating consumption. The government will therefore need to manage revenue risks while broadening the productive tax base through energy, logistics, technology, professional services, manufacturing and higher-value tourism.
State-owned companies and EU accession
EPCG, CGES, Monteput, railway entities and airport operators remain relevant to fiscal-risk management because their borrowing and investment decisions can affect the wider public-sector balance sheet even when liabilities are not formally classified as sovereign debt. The new framework also supports Montenegro’s preparation for EU membership, where fiscal reporting, procurement, state aid, public investment and budget execution will face stronger scrutiny. From 1 January 2027, Montenegro will operate under a fiscal framework centred on the 3% deficit ceiling, 60% debt reference level, medium-term expenditure controls, stronger fiscal oversight and improved public-investment management.
