So far, the government has only formally met the ten conditions requested from it by the International Bank for Reconstruction and Development (IBRD) at the beginning of 2018, because most of the measures have been postponed or are not being implemented, and in some the results are contrary to expectations.
In 2018, the IBRD, which is part of the World Bank, left the Montenegrin government with a list of conditions that it must fulfill in order to be granted a second guarantee of 80 million euros (PBG2) necessary for a new debt of 250 million euros to stabilize state finances. In the report on the results of negotiations with the IBRD so far, which was adopted by the Government last week, ten conditions were specified and what has been done so far. The report states that the minutes of the negotiations have been agreed upon and will be sent to the World Bank Board of Directors for approval.
"The approval of the PBG2 arrangement is conditioned by the implementation of strong reform processes and a stable political situation in our country. Accordingly, the condition for entering this form of cooperation is the fulfillment of the set of requirements of the IBRD, contained in the Matrix of public policies and results, which mainly refer to measures to stabilize public finances and further reforms", the Information stated.
Regarding the condition that the Government must improve its revenue collection and reduce tax informality - the gray economy, it is stated that "Montenegro has introduced electronic fiscalization for cash and non-cash transactions" and the adoption of the Law on Fiscalization is cited as proof of this. This Law was adopted in 2019, but electronic fiscalization was not introduced, as claimed in this document, but was subsequently postponed to 2021. As previously announced, this measure, which is expected to significantly improve public finances, would prevent non-issuance of VAT invoices and thereby reduce the evasion of this tax.
The IBRD asked to strengthen the management of public finances and through "strengthening the definition of priorities, selection, assessment and evaluation of capital investments", because money was spent on investments without criteria and analysis. The government states that it fulfilled this because in 2018 it adopted the Decision on the preparation of the capital budget and the determination and evaluation of criteria for the selection of capital projects. However, in the PEFA performance assessment for this area, published ten days ago, the World Bank gave the Government the worst rating, stating that multi-million dollar investments are being made without a feasibility study and cost-benefit analysis. They also stated that the Government declared the feasibility study for the Podgorica-Kolašin highway section a secret, which it did not even show to its team.
Regarding the conditions to reduce the number of employees in the public administration, the Government states that it has launched a plan to optimize employees and made a decision on the amounts and method of payment of severance pay. It was not stated that this measure has been postponed for years, and that in the meantime there has been an increase in the number of employees in some parts of the state administration. One of the conditions was to limit public spending on pharmaceuticals. The government states that it has rationalized spending on medicines and cites the adoption of the National Guidelines for Good Clinical Practice as evidence. However, in reality, the allocation of money for medicines is increasing, which was also done in the budget for this year. According to the analysis of the Health Insurance Fund, the most common reason for the increase in financial spending for prescription drugs is changes to the new list of drugs.
Montenegro also had the task of mitigating its negative impact on climate change. The government proves that it has done this by stating that it has established a legal framework, adopted a strategy and a law. This national strategy serves as a benchmark against which to measure whether Montenegro reduces emissions of harmful gases determined in 1990. The government has pledged to reduce emissions by 2030 percent by 30 compared to 1990. It has already been "done" because most of the industry from 1990 no longer exists. It is positive that, thanks to this conditioning, the environmental rehabilitation of the Pljevlja Thermal Power Plant has started.
The government also undertook to "increase the flexibility of the labor market", which it says it did with the new labor law. The goals were achieved to "make the process of firing" employees more efficient for employers, to extend the maximum duration of fixed-term contracts from 24 to 36 months, as well as to remove the obligation to pay severance pay for work engagements that are shorter than 18 months. This law came into force at the beginning of last month and it remains to be seen what its results will be.
An important condition of the IBRD was to increase the transparency and efficiency of public procurement, and the Government says that it fulfilled this condition by centralizing public procurement. Centralization was finally implemented, after several years of announcements, but many problems are still present, such as a high number of public procurements that are canceled, as well as the fact that due to complaints, many procedures take too long, so state institutions again often purchase materials and services at retail prices at higher prices.
Bankruptcies in Atlas and IBM Bank prove that CBCG works
Three conditions related to banking and concerned the improvement of regulation, strengthening of stability and strengthening of the regulatory and supervisory framework.
The government states that it has improved regulation by prohibiting banks from classifying assets based on adequate collateral and not on the borrower's ability, as well as by introducing a clear and uniform treatment of loan restructuring.
As proof that it has strengthened the banking system, the Government states that the Central Bank "updated time-limited supervisory action plans (SAPs)" and that it restructured and liquidated banks that do not comply with regulatory requirements and provisions of SAPs. As proof of that, she cited the introduction of bankruptcy in IBM and Duško Knežević's Atlas bank.
The Government cites the adoption of three laws - on credit institutions, on the rehabilitation of credit institutions and on the protection of deposits - as proof that it has strengthened the regulatory and supervisory framework.
Bonus video:
