After the government announced that in order to keep finances sustainable, it should start saving through the reduction of fees for maternal and child allowance, it further claims in the recovery plan, which is an integral part of the budget for the following year, that earlier fiscal policies “led to high levels of deficit and growth of public debt, mostly because of regular settlement of liabilities on the basis of mandatory expenses, primarily expenditure on pensions and welfare payments.”
On the contrary, the collapse of public finances began with a series of irresponsible government’s decisions that were made exclusively in the private and not in the public interest. Now, those decisions are not even mentioned, but the blame for the crisis is laid at the door of socially vulnerable categories of the population, many of whom are exactly those who were left without work and forced to accept social welfare or miserable pensions because of the government’s policies in the past three decades.
Although the government now claims that social expenditures represent an enormous burden on the budget, it was extremely generous to Prva Banka in 2008, and did not care too much how the state aid to the bank majority-owned by Aco Djukanovic would affect the liquidity of the budget.
Data possessed by MANS Investigation Center show that lending the support to Prva Banka was an introduction into the state indebtedness in order to maintain the liquidity and funding of the budget. In the years to follow, the government continued to enormously borrow money to cover its new, bad decision to support other private businesses, such as Aluminum Plant Podgorica (KAP) and the Bauxite Mines in Niksic.
The state of Montenegro had a budget surplus of €172 million in 2007, while it took a negligible loan of €2 million the same year.
However, in 2008, the government approved Prva Banka a credit assistance of €44 million and additionally acquired loans of €26 million from private commercial banks, which made the first major “hole” in the budget. It is not known if there was a serious analysis that would show how and to what extent the aid to the banking sector would affect the liquidity of the state budget, or if it was an effort to rescue private business of the Djukanovics at any cost.
This is particularly important because the same year, the Parliament of Montenegro adopted a law according to which the government committed to the payment of pension arrears in the amount of €105 million, and in the coming years, debts on the basis of restitution, old foreign exchange savings and commitments of state public enterprises had to be covered.
Already in 2008, the government began taking short-term loans in the amount of €7.5 million, while in 2009 it was forced take another short-term loan of €65 million. Meanwhile, long-term loans totaling €145 million were contracted.
Although the Government generated revenues from the privatization of €107 million in 2009, of which most of the money was obtained from the sale of its minority stake in EPCG (Montenegrin Electric Enterprise), as the majority owner of the company it decided to “pump” the money into Prva Banka, where it remained captured in the coming years.
The following year, 2010, showed how much the assistance to the banking sector affected the public finances, when the new Government borrowed another €225 million, of which 200 million was acquired through the issue of securities in the international market. However, a huge leap of indebtedness in that year was not a red alert for the government, but it additionally issued guarantees for loans of KAP, Zeljezara Niksic, Pobjeda, Melgonia, Crnogorska Plovidba…
Due to the decline of guarantees, most of which were for KAP and Bauxite Mine, the government paid around €190 million from 2011 until the end of 2013, which further ‘pushed down’ public finances and increased the level of annual debt from €234 million in 2011 to €832 million in 2015.
The government estimates that in the coming years it will have to borrow an average of half a billion, but this estimate is questionable and it is more realistic to expect that the amount will be higher.
MANS Investigation Center
