The World Bank (WB) will lend Montenegro 80 million euros by the end of the year, and when that loan will be approved will depend on the speed with which the government will implement the requested reforms, announced the head of the World Bank office in Montenegro, Christopher Sheldon.
He told the Television of Montenegro that he hopes that by reducing spending and increasing the state’s income, he will avoid bankruptcy.
“This year, the World Bank will not issue a guarantee to Montenegro for borrowing from commercial banks, but will directly credit the state in the amount of 80 million euros,” Sheldon said.
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 it then borrows from commercial banks. Among others, mostly due to market conditions, this time we have a different scheme where 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 loan will be realized in two tranches, and the first one is currently subject to agreement with the government. When it will be approved will depend on the speed with which the conditions of the World Bank are met.
“The conditions are divided into two categories – the first refers to fiscal resilience, that is, control of public spending.” As part of this, reforms are expected in the tax department and cost control for pharmaceutical consumption and medicines. Increasing revenue and controlling public spending will help the government reduce the fiscal deficit. The second category is reforms in the area of ​​green growth and climate resilience, i.e. harmonization with EU legislation. When those conditions are met, the government will receive a loan,” said Sheldon.
He claims that he will not ask for a reduction in salaries and pensions, nor in the number of workers in the state administration. Among the conditions is not an increase in the value added tax (VAT), but the excise tax, which the government already proposed to the parliament at the beginning of the year.
However, he warns that a way to sustainably reduce the deficit in the state treasury must be sought.
“A big problem for the country is the maturity of the euro bonds in June 2025. The fiscal deficit was very high last year, that’s why we are focusing so much on fiscal sustainability, in order to gradually reduce the deficit by then,” added Sheldon.
When asked if we are going to go bankrupt or not, Sheldon replied that the debt level is high, however there are measures being implemented and planned to hopefully reduce the debt. “This is an issue that needs to be managed well, there are external factors as well, but hopefully with good management, bankruptcy will not be the scenario,” concluded Sheldon.
