Austerity measures or debt crisis

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Montenegro would experience a debt crisis if there were no strategies and austerity measures that the Government plans to implement, said Martin Petri of the IMF at the press conference.

He said that the package of measures was good, that the measures were realistic and that the result could be even better than we currently expected.

The Government of Montenegro will increase the general value added tax (VAT) rate from 19 to 21 % in the next year, and the excise tax on cigarettes, alcohol, coal and carbonated water will also increase, while the lower VAT rate of 7% will remain unchanged.

It is planned to freeze employment in the public sector by replacing three natural job vacancies with one new employee.

The revision of compensation payments to mothers with three or more children is also planned. Among other things, the measures provide 6% reduction of officials’ salaries .

The Government of Montenegro says that measures are unpopular, but that the consolidation of public finances is necessary. The International Monetary Fund (IMF) today expressed support to the Government for the proposed measures.

According to Finance Minister Darko Radunovic, the aim of the new package of measures is to make public debt fall from 2019 and drop significantly in 2020 to 67 % , as well as to achieve deficit reduction, with the expected 4.5 % GDP surplus in 2020.

At today’s joint conference of Minister Radunovic, CBC Governor Radoje Zugic and Head of Mission of the International Monetary Fund (IMF) Martin Petri, one of the subjects was the fiscal consolidation by 2020.

Finance Minister Darko Radunovic said that all citizens would be effected by new austerity measures in “the slightest form” and that the situation is not ideal, but that the goal is to have a sustainable budget.

He said that the state would not enter into an arrangement with the IMF, but that international organization provided technical assistance. He explained that new measures in public sector did not mean dismissing workers, but retirements, redistribution of jobs and internal ads, while the pensions would not be freezed.

The IMF chief Martin Petri stressed that Montenegro’s biggest problem is debt.

Source: Radio Television Montenegro