NewsThe new Government to tackle the public debt

The new Government to tackle the public debt

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The public debt is something that the new government will have to deal with. Although it is below the Maastricht criteria for the first time since independence and amounts to 58% of the gross domestic product, according to Finance Minister Aleksandar Damjanović, it will be difficult to maintain that amount of debt, according to economists.

In the next four years, almost two and a half billion euros of old debts will be collected, so new debts, they say, are inevitable.

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Data on the growth of public debt show that for years we spent more than we earned, and that by borrowing.

In the four years since independence, Montenegro’s debts exceeded the value of the gross domestic product, so in 2020 we were 105% in debt.

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According to analyst Predrag Drecun, the only debt we can single out is for the highway.

“That makes sense because the effects of that project will be felt in 50 or 100 years. We have a bad public debt structure and maybe that is a bigger problem. I think that about 70% is owed to external partners. And the cost of living on the loan from the previous period comes to us for collection and that with interest. In the last two years, we managed to pay back part of the debt, and that was the case in 2023 as well”, he stated.

Minister Damjanović explains that the public debt without deposits is at the level of EUR 3.98 billion.

“If we know that it was 4.026 billion from the beginning of the year, we had its decline in absolute numbers. If we include deposits, which at the level of September 30 were around EUR 236 million, then the share of public debt in GDP is 58.2%”, adds Damjanović.

However, we were unable to pay all of this from regular income, so in the middle of the year, the state borrowed another EUR 100 million at an ever-higher interest rate that was close to 10%.

By the time the installments of that debt come due, new obligations await us by the end of the year.

“By the end of the year, EUR 123 million of obligations under old loans have to be paid in about two to two and a half months. Normal, taking into account some 38 million in interest. Bearing in mind the state of the state treasury, it is clear that all obligations can be settled from existing deposits, including those current inflows that we will have in some 60-70 days that we will have by the end of the year”, Drecun believes.

As of the new year, debts incurred before 2020 will be due again. Thus, in the next four years, the state should pay back almost two and a half billion euros.

Therefore, the economy must be ahead of party interests, not only for whoever sits in the hot seat of the Minister of Finance, but for the entire future parliamentary and executive authorities.

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