Montenegro’s reliance on short-term borrowing has quietly shifted from a tactical response to seasonal cash-flow gaps to a structural feature of public finances. Treasury bills and similar instruments now play a permanent role in bridging the mismatch between revenue and expenditure. Tourism generates the bulk of public revenue during the summer months, while obligations—wages, pensions, infrastructure spending—remain constant year-round. Short-term borrowing allows the state to meet these obligations without abrupt cuts, but it carries long-term implications that are often overlooked.
On the surface, the approach appears effective. Domestic banks remain liquid, demand for government securities is stable, and rollover risks seem manageable. Yet, the growing dependence on these instruments introduces vulnerabilities. Refinancing exposure rises: even minor disruptions in banking liquidity could force the state to borrow at higher costs or under less favorable conditions. Moreover, the public finances become increasingly intertwined with the domestic banking sector, concentrating risk within the system.
A deeper concern is the effect on fiscal planning. Routine reliance on short-term instruments allows underlying expenditure pressures to persist unaddressed, creating a cycle where borrowing substitutes for structural reform. While short-term debt is a normal tool in modern fiscal management, Montenegro’s scale and persistence of use suggest structural weakness rather than flexibility. With rising infrastructure demands and energy-related costs, the margin for temporary fixes is shrinking.
Breaking this pattern requires tackling the seasonality of revenue itself. Measures could include diversifying revenue sources, building larger fiscal reserves during peak periods, or aligning expenditure more closely with income flows. Without such adjustments, short-term borrowing risks becoming a silent constraint on policy flexibility, limiting Montenegro’s ability to respond to shocks and plan for long-term priorities.
