The Ministry of Finance has daily communication with the expert team of the World Bank (WB) with the aim of agreeing and finally defining the conditions for the granting of loans to Montenegro, which will be based on development policies, the government department announced.
They explained that it is a set of criteria related to reform processes in the field of public finance and ecology, which are still being discussed, and which will be presented to the board of this financial institution in the fall.
“The focus will be on the criteria that will influence the increase of budget revenues and contribute to fiscal resilience, and the credit arrangement will be intended to finance regular budget needs, which also include repayment of overdue debt,” said Pobjeda from the Ministry.
Earlier it was announced that this year the WB will credit Montenegro with EUR 80 million.
The Ministry did not answer whether issuing a WB guarantee would be more favorable than approving a loan of 80 million, considering that thanks to that guarantee they could take a larger loan from a commercial bank, with a lower interest rate.
The head of the WB office in Montenegro, Christopher Sheldon, announced at the beginning of May that the WB will not issue a guarantee to Montenegro for borrowing from commercial banks this year, but will directly credit the state in the amount of EUR 80 million. They decided to take such a step, as he said, because of market trends.
“Previously, we used the approach of issuing a guarantee to the Government, which was then followed by it borrow from commercial banks. Among others, mostly due to market conditions, this time we have a different scheme in which we give direct credit to the Government. We judged this to be the most effective approach. Such a direct approach is a good signal to the market that the government is serious about reforms”, said Sheldon.
The Ministry is still not thinking about an arrangement with the International Monetary Fund (IMF). “At the moment, that topic has not been raised, nor do we estimate that such an arrangement will be certain soon. As a member of the IMF, Montenegro has at its disposal a wide range of cooperation, which at the moment is predominantly of a consultative nature, with continuous technical support for the implementation of numerous projects”, said the Ministry.
Unlike the Ministry of Finance, the Governor of the Central Bank (CBCG), Radoje Žugić, believes that in the situation of deteriorating financing conditions and the existence of a number of internal and external risks, all borrowing options should be considered and a prudent debt management policy should be pursued.
“Therefore, I am of the opinion that the arrangement with the IMF should also be considered, especially since its contracting would mean borrowing on more favorable terms than market ones,” said Žugić last week.
According to him, more intensive cooperation with the IMF would also be a certain form of guarantee to investors that the conditions in Montenegro will not change in the coming period.
“Given that this instrument is mainly conditioned by the implementation of a “harder” policy, it is to be expected that the emphasis will be on structural reforms aimed at curing long-term vulnerabilities, as well as on reducing non-productive spending,” announced Žugić.
For now, the state borrowed only one-sixth of the plan, that is, EUR 100 million from Deutsche Bank, at an interest rate of 5.9 percent plus the six-month EURIBOR.
“The Ministry of Finance, regularly and up-to-date, monitors developments on the world capital market and evaluates the profitability of any potential borrowing, making a decision, with the consent of the Government, to realize only the necessary borrowings under the most favorable conditions at the given moment,” said the department.
