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Podgorica, Montenegro (7 June 2017) – Additional measures of fiscal consolidation will contribute to creating of the budget surplus and reducing the level of the public debt, thus providing a more equitable distribution of the social funds to those who need it the most and boosting the stabile economic growth, Minister of Finance Darko Radunović highlighted at the joint media conference with the Head of IMF Mission for Montenegro Martin Petri and the Governor of the Central Bank Radoje Žugić, following discussion on the Fiscal Consolidation Strategy…
Podgorica, Montenegro (7 June 2017) – Additional measures of fiscal consolidation will contribute to creating of the budget surplus and reducing the level of the public debt, thus providing a more equitable distribution of the social funds to those who need it the most and boosting the stabile economic growth, Minister of Finance Darko Radunović highlighted at the joint media conference with the Head of IMF Mission for Montenegro Martin Petri and the Governor of the Central Bank Radoje Žugić, following discussion on the Fiscal Consolidation Strategy.
“Thanks to the additional fiscal consolidation measures amounting approximately 2,5% of the GDP or EUR 117 million in the past three years, we are planning to achieve a surplus amounting 3,5% of the GDP and to reduce a public debt at 67% of the GDP in 2020. That is the main focus of the fiscal consolidation strategy which should be soon adopted by the Government,” Minister Radunović emphasised.
Measures envisaged by the fiscal strategy are aimed at harmonising of the excise tax policy with the EU standards (excise on tobacco products), as well as a gradual increase of excise on ethyl alcohol and carbonated beverages with sugar, Minister Radunović explained.
The increase in the VAT rate from 19% to 21% will be introduced in 2018, thus providing a transitional period of six months for adaptation of the economy to new circumstances.
“The lower VAT rate concerning food products won’t be changed. It will remain at 7% in order to avoid negative consequences on the living standards of the citizens. We will also keep the VAT rate at 7% for accommodation in the hotels, due to importance of the tourism for economy growth and employment,” Minister Radunović underlined.
We have decided to increase the VAT rate in 2018 because we believe that the it will have a minimal impact on the prices, Minister Radunović said, adding that the Government won’t change other tax rates within the implementation of the new fiscal consolidation measures.
The proposed fiscal consolidation measures also include the reduction of the wages of the senior officials for 6%, Minister Radunović explained.
The strategy will redefine the social policy by reducing the enormous expenditures for mothers with three or more children. It has also envisaged measures for equitable social policy, simulative policies for planning family, higher child allowance by 20% for beneficiaries of social assistance, single fees for the new-born babies, as well as active engagement in employment policy, Minister Radunović explained, adding that the Employment Agency of Montenegro will receive EUR 5 million for creating new jobs in 2017 and 2018.
All steps in pursuing the plan of fiscal consolidation were carried out in coordination with our partners: the IMF, the World Bank and the European Commission, Minister Radunović stressed, adding that the Government is committed not only to strengthening credibility of the public finances, but also to providing better position of the country at the financial markets and better credit rating.
Head of the IMF Mission for Montenegro Martin Petri highlighted that without the fiscal consolidation strategy there would have been a debt crisis in Montenegro. He stressed that the economic situation in Montenegro is encouraging, adding that the expected growth is estimated at 3%. In that regard, the fiscal consolidation measures will create a solid basis for the public finances in terms of pursuing the fiscal sustainability.
Governor of the Central Bank of Montenegro Radoje Žugić voiced support to the fiscal consolidation strategy, underlying that the Central Bank has improved the financial system and identified the weaknesses of the banking sector. He explained that the Central Bank will remain committed to strengthening the financial stability in the coming period.
Source: Government of Montenegro