Montenegro has not had a fiscal strategy since 2021, and this document will provide predictability regarding the government’s policies and vision for the economy, investors and citizens, said Finance Minister Novica Vuković during a discussion on the Draft Fiscal Strategy for the period 2024-2027 in the Parliament.
The document is the foundation for laws already in effect, including the “Evropa sad 2” program, under which minimum wages were increased, and new taxes were introduced for businesses and citizens.
Goals
Vuković stated that the government’s main goal is to create conditions for a comprehensive reform of the tax system and the creation of new sources of revenue. He explained that every aspect of the measures in the Fiscal Strategy was analyzed, including their impact on macroeconomic and fiscal stability, as well as their effect on employers and employees. Vuković emphasized that the shortfall of 180 to 200 million euros due to reduced pension contributions will be compensated through various measures, but there will be no increase in the general VAT rate, corporate income tax, or personal income tax.
“The main features of fiscal policy in the medium term will include the continued reduction of tax burdens on labor, aligning excise policy with EU directives, reducing the gray economy, reforming tax and customs administration, and better management of tax arrears,” said Vuković.
Transparency and economic growth
Tonći Janović (PES) argued that adopting the Fiscal Strategy would send a signal of transparency and predictability of tax policy for the next three years, which would protect both domestic and foreign entrepreneurs from ad-hoc changes. He added that for decades, there had been no attention paid to citizens’ living standards, with minimum pensions and wages being 145 and 250 euros, respectively. According to Janović, through this document, the government would focus on improving living standards and reducing tax burdens to attract foreign investments.
Unfulfilled promises
Danijel Živković (DPS) stated that this Fiscal Strategy is a failed plan by PES, pointing out that the government continues to lose public support with every election. He criticized the unfulfilled promises, such as a minimum wage of 700 euros and a 25% wage increase, while today, public sector employees only received wage increases of 5-7%. Živković also highlighted the failed promises made by former Finance Minister Milojko Spajić, such as the creation of 1,000 jobs in Pljevlja, zero unemployment, and a billion euros in investments from Japan. He claimed that today, investors are leaving Montenegro, and that the standard of living is worse than it was before 2020, citing the rising costs of housing and food.
“You have increased taxes because you don’t know how to fill the holes in the budget. In the next two years, the debt must exceed two billion euros. This is the infamous billboard economy, which aims to lead Montenegro to a Greek-like scenario and destroy the country’s finances,” said Živković.
Concerns about economic indicators
Miloš Konatar (URA) argued that the Fiscal Strategy does not comply with Maastricht criteria, and he predicted that by the end of 2027, Montenegro will be one billion euros more in debt compared to today.
Boris Mugoša (SD) expressed concerns about the Fiscal Strategy, stating that the data from the Statistical Office of Montenegro (Monstat) showed a decline in GDP in the third quarter.
“Next year, GDP growth of 4.8% is projected, based on continuous 8% growth in the tourism sector, which has seen a decline this year. We based the Fiscal Strategy on a 4.8% growth, so we are facing a serious challenge,” said Mugoša, adding that not enough attention was paid to the upcoming issues in the electricity market, particularly regarding the reconstruction of the Pljevlja Thermal Power Plant.
He also pointed out that the Fiscal Strategy lacks structural reforms, public administration optimization, and a clear decision on whether Montenegro will continue to be an overly consumer-driven economy.
Foreign investment focus
Zdenka Popović (Demokrate) stated that Montenegro no longer wants “corrosive” capital stemming from corruption, but rather respectable investors.
Unapproved report on energy sector
For the fifth consecutive year, the Economy, Finance and Budget Committee failed to adopt the report on the state of the energy sector, nor the report on the work of the Regulatory Agency for Energy and Utilities for the previous year, as the majority of MPs abstained from voting. However, the plans for the upcoming year from the Regulatory Agency for Energy and Utilities were supported. The MPs also adopted the report on the work of the Agency for Audio-Visual Media Services for the previous year, along with their plans for the following year.
