Montenegro’s state budget recorded a deficit of €33.2 million in January, representing approximately 0.4% of the country’s estimated GDP, according to the Ministry of Finance. This early-year fiscal imbalance is typical as expenditures often surpass revenues at the start of the budget execution period due to the timing of tax payments.
Despite the deficit, total budget revenues showed a moderate increase, reaching €162.6 million, which is about 1.9% of estimated GDP. This figure reflects a €5.9 million rise compared to January of the previous year, marking a 3.8% growth in revenue collection.
The primary driver behind this revenue growth was the value added tax (VAT), which generated €103.6 million—an increase of €7 million from January 2025—indicating robust consumption and service sector performance. Additionally, excise duties contributed significantly, with revenues totaling €25.9 million, up by €2.2 million or 9.3% year-on-year.
Excise taxes on mineral oils and petroleum derivatives accounted for €14.9 million, reflecting an 11.5% increase from the previous year. Meanwhile, excise taxes on tobacco products generated €8.3 million, showing an 8.6% rise compared to last January. Personal income tax revenues also experienced slight growth, amounting to €3.1 million.
Conversely, corporate income tax revenues fell to €2.1 million, down by €2.7 million from the same month last year due to seasonal payment dynamics and fluctuations in corporate profits. Social security contributions also saw a decline, totaling €15 million, which is €1.6 million less than in January 2025.
The Ministry of Finance highlighted that the full potential for revenue collection has not yet been realized due to ongoing implementation of a new Integrated Revenue Management System (IRMS). This digital modernization is expected to enhance efficiency and transparency in tax administration but has temporarily affected the timing of budget inflows.
In terms of expenditures, January saw spending reach €195.9 million, approximately 2.3% of estimated GDP. Although expenditures exceeded revenues, they were actually €80.2 million lower than initially planned for the month due to slower realization rates for some budget items.
Compared to January of the previous year, total expenditures increased significantly by €41.5 million or 26.9%, primarily because last year’s government operated under temporary financing while awaiting budget law adoption.
Current expenditures amounted to €70.8 million but remained below planned levels across various categories including operational expenses and administrative spending. Gross wages and employer contributions for public sector employees reached €59.1 million, accounting for 96.3% of the planned amount for January.
Social protection transfers were a notable component of spending at €88.5 million, reflecting an increase of €6.3 million from January 2025. Transfers to institutions and individuals totaled €15.9 million but fell short of monthly plans due to timing issues and administrative procedures.
Montenegro’s public finances have faced scrutiny due to high public debt levels and structural fiscal challenges; the budget deficit for 2025 was reported at €321.6 million or about 3.96% of GDP, driven by rising expenditures and social transfers.
However, recent fiscal consolidation efforts alongside steady economic growth have stabilized debt levels, leading international rating agencies to improve Montenegro’s outlook based on stronger macroeconomic fundamentals and anticipated fiscal adjustments.
The January deficit aligns with typical early-year fiscal patterns; revenue flows are expected to accelerate in subsequent months as tax payments increase and tourism activity picks up during the spring and summer seasons.
Looking ahead to Montenegro’s fiscal trajectory in 2026, key indicators will include revenue growth rates, sustainability of social spending, and the government’s ability to manage budget expenditures while fostering economic expansion.
