Montenegro’s state budget recorded a deficit of €33.2 million in January, equivalent to approximately 0.4% of the country’s estimated GDP, according to the latest data from the Ministry of Finance.
The January fiscal balance reflects the early-year dynamics of public finances, where expenditures typically exceed revenues due to the timing of tax payments and the beginning of annual budget execution. Despite the deficit, revenue collection showed moderate growth compared with the same period a year earlier.
Revenue growth led by VAT and excise duties
Total budget revenues in January reached €162.6 million, representing about 1.9% of estimated GDP. This figure was €5.9 million higher than in January of the previous year, indicating a 3.8% increase in revenue collection.
Value added tax (VAT) remained the dominant source of budget income. VAT revenues amounted to €103.6 million, which was €7 million more than in January 2025, reflecting continued strength in consumption and service-sector activity.
Excise duties also recorded solid growth. Revenue from excise taxes reached €25.9 million, up €2.2 million or 9.3% year-on-year. The largest contribution came from excise duties on mineral oils and petroleum derivatives, which generated €14.9 million, an 11.5% increase compared with the previous year.
Excise taxes on tobacco and tobacco products generated €8.3 million, representing a year-on-year increase of 8.6%.
Personal income tax also recorded moderate growth, reaching €3.1 million, slightly higher than in January 2025.
However, some categories showed weaker performance. Corporate income tax revenues amounted to €2.1 million, which was €2.7 million less than in the same month of the previous year, reflecting seasonal payment dynamics and corporate profit cycles.
Social security contributions also declined slightly, totaling €15 million, or €1.6 million less than a year earlier.
Temporary revenue effects from tax system reform
The Ministry of Finance noted that the full potential of revenue collection has not yet been realized because the Tax Administration is implementing a new IRMS system, a major digital modernization of the tax administration infrastructure.
The transition to the new system required temporary extensions of deadlines for filing tax returns, which temporarily affected the timing of budget inflows during January. Authorities expect the system to improve long-term efficiency, transparency and processing speed once fully implemented.
Expenditures exceed revenues
Budget expenditures in January reached €195.9 million, equal to roughly 2.3% of estimated GDP.
Although spending was higher than revenues, the Ministry noted that actual expenditures were €80.2 million lower than originally planned for the month, reflecting slower realization of some spending items early in the fiscal year.
Compared with January of the previous year, however, spending increased significantly. Total expenditures were €41.5 million or 26.9% higher, partly because last year the government operated under a temporary financing regime while waiting for the budget law to be adopted.
Structure of government spending
Current expenditures during the month amounted to €70.8 million, remaining below planned levels across several categories such as operational expenses, maintenance and other administrative spending.
Gross wages and employer contributions for public sector employees reached €59.1 million, representing 96.3% of the planned amount for the month.
Social protection transfers were a major spending component, totaling €88.5 million, which was €6.3 million higher than in January of the previous year.
Transfers to institutions, individuals, non-governmental organizations and the public sector amounted to €15.9 million, significantly below the monthly plan due to the timing of payments and administrative procedures.
Fiscal context
Montenegro’s public finances have been under close scrutiny in recent years due to high public debt and structural fiscal pressures. The country’s budget deficit reached €321.6 million in 2025, equivalent to roughly 3.96% of GDP, reflecting rising expenditures and social transfers.
However, fiscal consolidation efforts and steady economic growth have helped stabilize debt levels, while international rating agencies have recently improved Montenegro’s outlook, reflecting stronger macroeconomic fundamentals and expectations of continued fiscal adjustment.
Early-year fiscal signal
The January deficit of €33.2 million represents a relatively small portion of the annual fiscal framework and is typical for the beginning of the budget cycle. Revenue flows generally accelerate in the following months as tax payments increase and tourism-related economic activity begins to strengthen during the spring and summer season.
For Montenegro’s fiscal trajectory in 2026, the key indicators will remain the pace of revenue growth, the sustainability of social spending and the government’s ability to maintain control over budget expenditures while supporting economic expansion.
