The government’s plan for the repair of the budget deficit and public debt, which is an integral part of the Draft Budget for the next year, is an incomplete document with stark and arbitrary projections, which raises the question of whether the debt of €2.6 billion over the next five years was a realistic projection, or the debt will be significantly higher.
If taken into account that in recent years the government has mostly borrowed to cover the liquidity and funding of the budget, and that the seven-year period from 2009 to 2015 it borrowed a billion more than originally estimated, it is clear that the future plan of debt of €2.6 billion could easily be exceeded.
It is rather unbelievable that the recovery plan was prepared in only 20 pages, without relevant and sufficient statement of reasons. Therefore, one gets the impression that the government of the new Prime Minister Dusko Markovic had no real intention to seriously address this important issue, but only to formally satisfy the obligation under the Law on Budget and Fiscal Responsibility, which stipulates the adoption of the recovery plan when the public debt exceeds 60 percent of GDP.
To repay huge debts to domestic and international banks, pay off earlier commitments, such as restitution, old foreign exchange savings, and the like, and provide liquidity of chronically empty state coffers, the government plans to spend the next five years borrowing on average half a billion a year, considering that it would be enough to cover all the “holes” in the public finances.
However, data from the Ministry of Finance from the previous seven-year period, i.e. from 2009 until the end of 2015, show that government’s forecasts regarding the required level of indebtedness were completely wrong, because it borrowed 2.7 billion in this period, which means that the projection missed by unbelievable one billion.
Thus, in 2009 the government planned to borrow 177.8 million, but it actually borrowed 256.7 million. The following year, it felt that €91.7 million would be enough, but it borrowed 225.4 million, while in 2011, instead of projected 150 million, it took 234.6 million.
The budget for 2012 predicted the debt of 308 million. However, by the end of the year, the sum increased to 321.5 million. In 2013 the plan was 205.9 million, but the actual debt reached 333.8 million. In 2014, the envisaged loan was 227.9 million, but it reached 535.7 million.
Finally, in 2015, the planned debt was 634 million, but the government exceeded it by 200 million and took a loan of 832.8 million. Final data for this year, which project the debt of 544 million, will be known only in the coming year.
The recovery plan does not contain sufficient, substantiated information on some of the fiscal measures, which are supposed to increase inflows in the future, such as the increase of hidden taxable income of 10 million a year, or the 15-million increase based on the annual collections from the so-called gray zone. Those information are not substantiated to show that that revenues will actually be achieved.
In addition, the government’s recovery plan uses an estimate of investments in the three-year period (from 2017 to 2019) of €2.7 billion as one of the parameters for assessing the growth of Montenegrin economy. Yet, it does not specify the investments that would be implemented in this scope.
The single largest investment in the country currently is the motorway, the construction of which could cost around €700 million over the next three years. In the energy sector, the project of undersea cable is being implemented and a number of smaller energy facilities being built, but they cannot exceed the sum of several hundred million, while the project of building a new thermal power plant in Pljevlja is questionable.
There is a number of tourism projects carried out on the coast, but all the projects from different areas can hardly generate the total value of €2.7 billion in a three-year time limit. Therefore, it remains unclear whether the government uses the enormous investment for “embellishing” the data on economic growth, or some investment projects have been contracted in the meantime, of which the public still does not know anything.
Finally, although the government formally proclaims that one of its objectives is the protection of socially vulnerable strata of society, the proposed measures do not prove this statement, especially bearing in mind the planned reduction of mothers’ benefits, postponing the application of payment of child allowance for certain categories, and the introduction of an excise tax that will raise the price of gas for all consumers.
Having in mind all of the above, it is obvious that the government not only continues the uncontrolled and poorly designed budget policy, but persistently transfers the burden of the crisis to the most vulnerable citizens, instead of taking from those who have the most.
MANS Investigation Center
