NewsNavigating Montenegro's path to establishing a development bank

Navigating Montenegro’s path to establishing a development bank

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Occasionally, and for over two decades now, the discussion about establishing a development bank resurfaces. It’s worth noting that we are among the few countries worldwide lacking such a financial institution, whose primary role is to finance long-term capital investments crucial for both social and economic progress.

Recent announcements indicate that the Investment and Development Fund will undergo transformation into a development bank. This transformation necessitates the drafting of legislation aligned with European standards, particularly those governing the development banks of the European Union.

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Predrag Drecun, the newly appointed president of the Board of Directors, refrains from speculating on the timeline for this transformation but emphasizes the manifold advantages a state bank would bring.

“This government envisions the IRF evolving into a modern bank in the foreseeable future. We will strive to expedite this process as much as possible. Naturally, there are legal and economic steps that need addressing. A state-backed bank provides a level of assurance for our foreign partners,” highlights Drecun.

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During a recent government session, new leadership for the IRF was appointed. When asked about the prospects of the new management in realizing the establishment of a development bank, Branko Radulović, a longstanding advocate for this initiative, expressed skepticism.

“I don’t anticipate the establishment of a development bank, nor do I foresee any significant reforms in the financial sector or the implementation of a Marshall Plan. My expectations extend to sustainable transportation, green energy, food self-sufficiency, and sustainable tourism,” Radulović remarks pessimistically.

Radulović underscores the pivotal role of a state bank in supporting development projects, ensuring liquidity in the economy, and providing guarantees for businesses with long-term viability.

“A development bank indirectly influences commercial banks by compelling them to adjust interest rates on deposits and lending. This mechanism helps in fostering economic growth and stability,” explains Radulović.

It’s noteworthy that the transformation of the IRF into a Development Bank was incorporated into the economic reform program until 2026. The Ministry of Finance has been tasked with establishing a working group to oversee this process, comprising representatives from key ministries and the Investment and Development Fund.

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