IMF says Montenegro should reduce spending on public wages and pensions to reduce debt

IMF says Montenegro should reduce spending on public wages and pensions to reduce debt
The Podgorica government is trying to improve local government finances, cut spending and reduce its high public debt
By bne IntelliNews June 7, 2017

The International Monetary Fund advised Montenegro to reduce its spending on public wages and pensions as a next step towards improving its fiscal discipline in order to cut public spending and reduce debt.

Montenegro has already drafted a set of measures aimed at cutting spending and reducing its high public debt, including reduction of social payments to mothers of three or more children and of public sector wages. The Podgorica government has also given local firms the opportunity to ask for tax debt reprogramming. The tax authority received around 5,500 requests to reprogramme a combined total of €185mn of tax debt. It is also discussing increasing VAT for certain goods.

“The authorities are already taking some steps to limit wage costs by reducing the wages of senior officials and shrinking the public sector work force. They do not intend to reduce existing pensions but rather limit costly early retirement options. There is also a need to improve local government finances, service delivery, and fiscal accountability,” the IMF said in a statement on June 7 upon completion of a mission to Montenegro.

It added that the fiscal strategy drafted by the government was in line with the fund’s recommendations and, if approved, would put government finances on a strong footing to achieve fiscal sustainability.

The programme aims to reduce Montenegro’s public debt and return its budget to surplus within three years. Several international institutions have warned that Montenegro should improve its fiscal discipline to cut spending and reduce public debt.

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