Montenegrin finance minister Radoje Zugic said he expects 1.7% GDP growth in the second quarter of the year after the economy already expanded an annual 4.3% in the first three months thanks to the favourable hydrological conditions and the public revenue inflow, state broadcaster RTCG reported. The GDP was up 0.3% in the second quarter of 2012.
Zugic said that the significant improvement in the economic growth this year will lower the share of public debt in GDP. He was speaking on July 11 after the regular cabinet meeting.
His comments came amid reporters’ questions regarding the proposed budget revision, which aims to transfer to the state the EUR 61mn electricity debt of aluminium firm KAP, as well as to make room for additional borrowing that will compensate the activation of EUR 102mn state guarantees issued on KAP loans at Russia’s VTB Bank and Hungary’s OTP.
Zugic said that despite the guarantees activation the country’s public debt will remain within the Maastricht criteria by the end of the year. It is equivalent to some 50% of GDP at present – somewhat lower than previously announced at the beginning of 2013 thanks to the first-quarter GDP increase.
KAP's STATE GUARANTEES
VTB Bank and OTP activated the EUR 102mn state guarantees issued to KAP loans in early July after the news that KAP is entering into bankruptcy (officially announced on July 8).
Zugic said the government has already set for talks with the bank creditors, offering to make credit arrangements with VTB and OTP. “I think we are on a good way to make an arrangement with OTP, while the dealings with the Russian lender we will solve via other banks,” he added.
The government aims to agree these new credit contracts with a maturity of over three years in order to spread the fiscal burden over a longer period of time, Zugic said, underlining the state is able to service its obligations despite all emerging speculations about the opposite.
The government issued the guarantees to the aluminium firm back in 2009, when in return it took over half of the holdings of Russia’s CEAC in KAP, acquiring a nearly 30% stake in the aluminium firm. Back then KAP was issued state guarantees worth EUR 135mn but Deutsche Bank already activated its last year after the company failed to service its credit. As a result, the government paid out EUR 23.4mn to Deutsche Bank after revising last year’s state budget in order to secure the amount.
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