Montenegro distributed more than €33 million from its Equalisation Fund to 18 less-developed municipalities in the first half of 2026, with northern local governments receiving the largest share as regional differences in fiscal capacity persist. The payments represented around 60% of the approximately €55 million allocated to the fund for the full year, according to figures published by Action for Social Justice.
The 13 northern municipalities received about €21.2 million, or nearly two-thirds of first-half transfers. Bijelo Polje received approximately €4.4 million, the largest individual allocation cited, followed by Rožaje with more than €3.4 million, Berane with around €2.5 million and Pljevlja with about €2.4 million.
The Equalisation Fund is intended to reduce differences in municipalities’ ability to finance public services from their own tax revenues. Municipalities with stronger tourism, property and business markets can generate more revenue from real-estate taxes, construction charges, local fees and economic activity. Those sources are more limited in areas facing population decline, weaker employment and lower private investment, particularly in the north.
The transfers allow less-developed municipalities to maintain public services that their own revenues could not finance at comparable levels. For smaller local governments, the first-half allocation of more than €33 million represents significant support for wages, utilities, maintenance and other recurring expenditure. Fiscal transfers do not necessarily create new economic activity. Municipalities can stabilise their finances while continuing to lose population and private investment.
Northern municipalities therefore remain dependent on national infrastructure and investment policies to strengthen their underlying economic position. Projects including the Mateševo-Andrijevica motorway extension, railway rehabilitation, energy investments and tourism development could improve connectivity and create new economic opportunities. Pljevlja is also expected to receive investment connected with the transition away from coal, including a proposed €50 million heating and energy-efficiency programme being prepared with World Bank support.
The regional divide is reinforced by geography, higher infrastructure costs in mountainous areas and the movement of younger workers toward Podgorica and the coast. A smaller workforce and customer base can make it harder for businesses to invest and recruit employees, creating further pressure on local revenues. The effectiveness of equalisation therefore also depends on how municipalities use the transfers. Funding that mainly covers current expenditure can stabilise budgets, while greater capacity to co-finance infrastructure, prepare investment projects and improve services could support longer-term development.
Administrative capacity is becoming increasingly important as Montenegro gains access to additional EU programmes. Municipalities will be eligible for the European City Facility, which provides grants and technical assistance for energy and climate investment concepts.
Other EU and international financial institution programmes cover areas including water, wastewater, energy efficiency and local transport. Smaller municipalities, however, can face difficulties preparing the documentation and projects required to access such funding. Pljevlja’s €2.4 million allocation illustrates the challenge as the municipality faces an economic transition that could reshape its revenue base. Coal mining and the Pljevlja thermal power plant support employment and economic activity but face pressure from European decarbonisation policies. In Bijelo Polje, the approximately €4.4 million transfer supports municipal finances but does not replace the need for private investment and employment growth. Improved road and rail connections could create opportunities in logistics, light industry and services.
Rožaje and Berane face similar development challenges, while tourism outside the coast and renewable energy represent potential sources of investment for northern municipalities. Mountain tourism remains smaller than the coastal market and is often seasonal, while renewable-energy projects may generate limited local employment after construction. Revenue-sharing and local taxation arrangements therefore affect how much economic value remains within municipalities. EU accession could eventually provide northern municipalities with access to larger regional-development funding. However, the ability to prepare projects, manage procurement and absorb available financing will remain important. The first-half distribution shows that €21.2 million of the €33 million allocated from the Equalisation Fund went to 13 northern municipalities, underscoring the continued concentration of fiscal needs in the region.
