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sector challenges stemming from natural gas import dependence. Other priorities include supporting vulnerable populations.
6.7 Budget and Debt – Montenegro
Montenegro’s government adopted the 2025 budget with a deficit of €278mn, equal to 3.5% of the planned GDP. The revenue is planned at €2.89bn, up 3.7% y/y, while spending is set at €3.16bn, up by 5.1% y/y.
The 2025 budget draft is based on the Europe Now 2 programme, which envisages minimum wage and pensions hike, reduction of the tax burden on labour, and unification of VAT rates for the hospitality sector.
Capital investments are planned at €280mn in 2025.
The government also has projected that public debt will reach 60.7% of GDP in 2025.
The 2025 gap is set at €1.14bn and will be funded using deposits, existing credit agreements and new borrowing.
Next year, the state can borrow up to €900mn to patch the budget gap through new loans from financial institutions and banks, issuing state securities, and signing bilateral or other credit agreements, according to the draft 2025 borrowing strategy submitted to Parliament last week.
An additional €500mn can be borrowed for refinancing of existing debt and building of fiscal reserves for 2026 and 2027.
Podgorica can also sign credit agreements of up to €275mn with the EU for the implementation of projects under the EU Reform and Growth Facility for the Western Balkans. Another €566.5mn can be borrowed from the Council of Europe Development Bank (CEB), the EBRD, the EIB and the World Bank for already approved projects.
In 2025, Montenegro is expected to issue a retail bond, seeking to raise €50mn. Plans for such bonds were announced by Podgorica in 2023 but so far the government has not taken any steps to offer such securities on the domestic market. The interest rate would be more competitive compared to the interest rates offered on deposits with commercial banks.
Although that would redirect funds from banks to the state securities, the ministry does not expect that to cause troubles for the banking sector as its liquidity remains high.
The government decided to move forward its plan for a ‘people’s bond’ after its credit rating was improved by Moody’s at the end of September for the first time in eleven years, to Ba3 from B1, leaving the outlook stable. Standard & Poor’s has also improved Montenegro’s rating to B+ from B with a stable outlook.
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