The draft law on the budget for 2025 represents a continuation of violations of the Law on Budget and Fiscal Responsibility (ZBFO), as well as the Macroeconomic and Fiscal Policy Guidelines for the period from 2024 to 2027, so it can be concluded that the budget is fiscally irresponsible even though the Prime Minister Milojko Spajic openly, for the umpteenth time, deceived the public when he said that the budget parameters were in accordance with the Maastricht criteria.
This was pointed out to "Vijesti" by the economic analyst and director of "Fidelity consulting". Miloš Vuković.
He emphasized that the capital budget of 280 million is one of the lowest in the history of Montenegro, that the cost of interest paid by the state is also increasing, that there is no optimization of public administration, that the cost of non-productive public spending is increasing (expenses for services, official trips, consulting studies , projects and services...
Vuković said that the prime minister's performance at the press conference the day before yesterday was more designed for the Tik Tok social network than befitting a serious topic such as the presentation of the state budget for the challenging year 2025.
Current budget spending limits higher than GDP growth
"The budget deficit for 2025 is 3,5% in relation to GDP (the Maastricht criteria is a 3% deficit), while the ratio of debt to GDP exceeds the limit prescribed by the Maastricht criteria of 60%. In addition, the proposal of the Law on the Budget for 2025 openly violates (ZBFO) and the limits from the macroeconomic and fiscal policy guidelines (which were adopted even though the Parliament did not adopt the Fiscal Strategy), which this same Government adopted a few months earlier (September 2024 ). Namely, Article 22 of the ZBFO stipulates that "the growth rate of the consumption limit for the current budget and the budget of state funds must be lower than the planned rate of real GDP growth, while the growth rate of the consumption limit for the capital budget and budget reserve cannot be higher than the nominal growth rate of GDP. "Planned GDP growth is 4,8%, while the growth of the current budget spending limit in 2025 is 7% (increase from 1,4 billion to 1,5 billion euros). Therefore, in addition to violating the Maastricht criteria, the Government knowingly violates the ZBFO because the current budget spending limit is higher than the GDP growth for the year 2025," explained Vuković.
He assessed that the revenue side of the budget is based on unreliable projections.
"Namely, the main revenue item, VAT revenues, is projected at 1,37 billion euros, which is an increase of 14% compared to 2024 and makes up almost half of the total budget revenues, while excise revenues are planned at 404 million euros, which is an increase of 38 million euros or 10% compared to 2024. In uncertain domestic and international relations, the GDP growth rate is optimistically defined at 4,8% and contains assumptions that foreign citizens will continue to live and spend in Montenegro. This results in drastically higher prices for apartments that our fellow citizens can buy at high interest rates, which, combined with inflation, creates strong pressure on citizens' living standards, so the increase in wages and pensions is not felt at all. The above best confirms that the GDP per capita according to the standard of purchasing power in Montenegro today is almost identical to what it was four years ago," Vuković pointed out.
Special attention should be paid to the more than modest capital budget, which amounts to only 3,5% of GDP and is one of the lowest capital budgets in the economic history of Montenegro, says the interlocutor of "Vijesti".
"In the context of the capital budget, the Velje brdo project is indicative. Namely, in the budget for 2025, it is stated that 10 million euros will be spent on this project, while the total value of the project is 60 million euros. No goals and performance indicators have been defined, nor have obligations been defined for this project. Additionally, it is unclear how this project even made it into the budget, given that it was only presented in September and does not meet project maturity requirements. Of course, the figure of 60 million euros is symbolic for the construction of 10.000 apartments on a huge area that needs to be communally equipped, so it can be stated that the Government has abandoned the construction of the originally announced 10.000 apartments", said Vuković.
Prime Minister's logic
He assessed that the following "winning" logic of the Prime Minister deserved the special attention of the public - we are returning about 60 million euros in installments for the loan for the priority section of the highway that we took in dollars at an interest rate of 2% in the same way that we took a new loan in dollars with with an interest rate of 7,25%.
"Exactly this kind of refinancing of the existing debt at high interest rates led to the fact that the cost of interest on the same amount of debt increased from 111 million euros, which amounted to 2020 million euros in 160, to 160 million euros in 2025 ( an increase in interest expense of almost 50%). If the public debt is the same, this means that we refinanced the old debt at much less favorable interest rates than then. To be precise - we pay almost half the higher interest on the same debt. There is no optimization of public administration, no reduction of non-productive spending, on the contrary, it is growing - compared to 2024, in 2025, expenditures for services increased from 77 to 100 million euros (31%), official travel from six to 8,2 million euros (37%), consulting services, projects and studies increased from 34,3 to 45,5 million euros (32%), other services from 12,7 to 17,5 million euros (37%)", said Vuković .
According to the rebalancing of the Government's budget for the year 2024 for November and December (the first two months of the implementation of the law from the fiscal strategy that has not yet been adopted), the budget deficit is planned at a total of 130 million euros, which shows, Vuković states, the scale of the problem that the budget will face Montenegro to face after the reduction of contributions to PIO.
He assessed that the prime minister's performance at the press conference the day before yesterday was more designed for the Tik Tok social network than befitting a serious topic such as the presentation of the state budget for the challenging year 2025.
"The day before yesterday, we witnessed disjointed attempts to discipline critical media and individuals who rightfully ask the right questions and get confused answers to them with a subtle replacement of theses, which shows that public finances in the field of expenditure are managed spontaneously, in violation of the law. While shifting responsibility for bad economic indicators to others, the prime minister selflessly took all the credit for good economic results, even when he was not in the government. "Inflation does not touch him, he did not mention the high prices of apartments, while diversification of the economy is not even in sight," Vuković said.
Spajić criticized the first collaborators
The fact that we heard the open confession of the chief of staff of the Prime Minister is astonishing Branka Krvavac Vuković emphasized that the draft law on the budget was not sent to the Parliament of Montenegro within the legal deadline (Friday, November 15), but was prepared "over the weekend", while the date 15 November.
"Additionally, the seal of the Parliament of Montenegro was registered on November 18, 11, which confirms that the budget law was not submitted to the Parliament within the legal deadlines," Vuković said.
According to him, it was very unpleasant to listen to the Prime Minister's fierce criticism regarding the fiscal policy before 2020 at the expense of his first associates who were present at the presentation of the budget proposal, because it was they who held high positions in the then administration and meticulously prepared the fiscal strategies that the Prime Minister now he criticizes ambitiously.
"As the Prime Minister, in a fit of honesty, asked where the people were when the deficit was in double digits, I want to help him and tell him that those people were right next to him at the budget presentation. If I'm not mistaken, except for the current Minister of Finance, all the others who were at the budget presentation were high-ranking employees in the administration that led us to a double-digit deficit in 2020 and an unenviable situation when we borrowed from the IMF in order to stabilize the eroded fiscal positions. Therefore, I suggest to the Prime Minister to ask them where they were in 2020 - I'm sure they will get interesting clarifications, especially considering their statement that no one could get a job in the public administration without being a member of the ruling party at the time, which annually spent 200 million euros for braggadocio and corruption", which he now openly "embraced" and, unfortunately, improved", emphasized Vuković.
As he added, considering that the prime minister refers to the period before 2020 (in which, by the way, he did not advertise the economic situation in the country), it can be stated that the budget for 2025 represents a continuation of negative practices before 2020. while in some positions of the budget, the negative practice has unfortunately improved.
"If the Prime Minister's claim is correct that the previous governments annually spent 200 million euros on "boasting and corruption", due to which the debt increased to four billion euros ("200 million times 20 years"), then it is logical that this government continued the same the practice of "bragging and corruption" which weighs 200 million euros per year, because the debts incurred on the basis of the said "bragging and corruption" are refinanced and not reduced, and at higher interest rates," emphasized Vuković.
The EC gave the best answer to the planning of public finances
Vuković pointed out that the best response to public finance planning was given by the European Commission.
"The EC stated in the report for Montenegro that "the credibility of medium-term revenue and expenditure forecasts remains low", "the draft of the Government's medium-term work published in February 2024 has no clear connection with the budget framework of the annual program, "the research on the open budget published in May 2024 gives Montenegro a transparency rating of 48 (out of 100), which indicates insufficient transparency of the budget. "Significant issues remain in the availability and content of key budget documents, the fiscal goals (public debt) are not in accordance with the fiscal rules," stated Vuković.
"While shifting responsibility for bad economic indicators to others, the prime minister selflessly took all the credit for good economic results, even when he was not in the government," Vuković pointed out.
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