Montenegro’s government has revised its budget plan for 2018, raising the projected deficit to 3.16% of GDP from initially planned 2.6%, a statement on the government’s website said. At the same time, the borrowing for this year was also increased, to €440mn from initially planned €296.7mn.

Podgorica attributed the budget revision to higher than expected revenue and increasing macroeconomic stability, which could secure debt refinancing at more favourable conditions. Montenegro is putting a lot of effort into improving its fiscal discipline and this year introduced a set of measures aimed at cutting spending and increasing revenue.

The revenue was increased by €57mn, while spending was raised by €82mn. The budget framework has been revised up to €2.08bn from the previously set €2bn. The deficit is set at €139.14mn.

The higher revenue should come from VAT, profit tax and revenue from taxes on international trade and transactions. At the same time, projections for property tax and income tax were lowered.

The government plans to spend an additional €70mn this year as it starts paying Italy’s A2A for its stake in power firm EPCG. A2A sent a put option notice to Montenegro’s government, exercising the right to sell its 41.7% stake in power company EPCG for €250mn, in July 2017. At the end of September, A2A’s three-month deadline to find a buyer for its stake ended, clearing the way for Podgorica to buy it back for €250mn under the put option agreed between the two parties.

According to the revised plan for new debt, the government could borrow up to €250mn for budget spending, debt repayment and reserves, and another €190mn for the ongoing construction of the first section of the key Bar-Boljare motorway. The government could issue bonds on the domestic or international markets, according to the changes.

Montenegro is already one of eight countries worldwide that is at risk of debt distress due to the loans it has taken out to finance projects under the Belt and Road Initiative (BRI) initiated by Beijing, which include the Bar-Boljare motorway, according to a new study by Washington-based think tank the Center for Global Development.