Download Montenegrin Debt Management Strategy 2005

GOVERNMENT OF THE REPUBLIC OF
MONTENEGRO
MONTENEGRIN DEBT MANAGEMENT STRATEGY
2005 - 2007
Podgorica, 2005.
1
CONTENTS
C O N T E N T S ................................................................................................... 2
I N T R O D U C T I O N ....................................................................................... 4
1.
INSTITUTIONAL AND LEGAL FRAMEWORK ......................................... 5
2.
ANALYSES OF DEBT POSITION AS OF THE END OF 2004 ................. 7
3. PUBLIC DEBT MANAGEMENT POLICY GUIDELINES ............... 10
Reorganization of T-bills Issuance .............................................................................................................10
Repayment of Bank Loans ..........................................................................................................................10
Repayment of Budget Arrears...................................................................................................................11
Establishment of key debt indicators as guidelines for debt and liquidity management .....................11
Investment in infrastructure shall increase in accordance with established limits................................11
Basic budget shall remain balanced ...........................................................................................................11
Reserves for capital investments and preparation of capital budget ......................................................11
4. ANALYSES AND PROJECTIONS OF DEBT INDICATORS MOVEMENTS 12
Total debt/Gross Domestic Product ..........................................................................................................14
Total debt/Budget revenues ......................................................................................................................14
Interest costs/Budget revenues ..................................................................................................................14
Total debt servicing/Budget revenues .......................................................................................................14
5. PROJECT ACTIVITIES ................................................................................ 15
5.1.
REVIEW OF CURRENT INVESTMENT PROJECTS ...........................................................15
5.1.1. WORLD BANK – IDA (International Development Agency) ..................................................16
Ministry of Economy ................................................................................................................................16
Ministry of Environment and Urban Development ..................................................................................16
5.1.2. EUROPEAN INVESTMENT BANK ........................................................................................16
Ministry of Transport ................................................................................................................................16
Ministry of Economy ................................................................................................................................17
5.1.3. EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT .............................17
Ministry of Transport ................................................................................................................................17
Ministry of Economy / Agency for Reconstruction of Economy and Foreign Investments .....................17
5.1.4. GERMAN CREDIT BANK FOR RECONSTRUCTION AND DEVELOPMENT ..................17
Ministry of Economy ................................................................................................................................17
2
Ministry of Environment and Urban Development ..................................................................................17
5.2.
FUTURE INVESTMENT PROJECTS .........................................................................................18
5.2.1. EUROPEAN INVESTMENT BANK ........................................................................................18
Ministry of Transport ................................................................................................................................18
Deputy Prime Minister Cabinet for Economic Policy and Economic Development ................................19
Ministry of Environment and Urban Development ..................................................................................19
5.2.2. EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT .............................19
Ministry of Transport ................................................................................................................................19
Ministry of Environment and Urban Development ..................................................................................20
Ministry of Environment and Urban Development ..................................................................................20
5.2.3. GERMAN CREDIT BANK FOR RECONSTRUCTION AND DEVELOPMENT ..................20
Deputy Prime Minister Cabinet for Economic Policy and Economic Development ................................20
5.2.4. OTHER PROJECTS...................................................................................................................20
Ministry of Environment and Urban Development ..................................................................................20
Ministry of Transport/ Ministry of Agriculture, Water Supply and Forestry ...........................................21
Ministry of Education ...............................................................................................................................21
5.2.5. RECAPITULATION..................................................................................................................22
5.3.
INVESTMENT PROJECTS OF PUBLIC SECTOR FOR THE PERIOD 2005-2007 .................23
6.
C O N C L U S I O N ................................................................................ 27
3
INTRODUCTION
The objective of the Debt Management Strategy is to identify the key directions
and priorities of midterm debt policy. Domestic legislation puts the emphasis on
defining investments to be financed by foreign credit lines. Significant amount of
debt and the costs that the State Budget has for servicing and refinancing debt,
have significant impact on the State Budget, balance of payment, banking
system and money market. Having in mind the mentioned, debt management
strategy is extremely significant for maintenance of macroeconomic stability of a
country on one hand as well as guidelines to optimal investment portfolio that
will provide for sustainable development of Montenegro.
Since Montenegro defined membership in European Union as its strategic
political goal, it is obliged to establish required financial infrastructure in its
market. This proposal document has been developed based on budget
projections and projections of macroeconomic indicators; it refers to the period
2005-2007 and it will be another regulation that will contribute to better
compatibility with EU legislation. Final numbers shall be defined in the annual
Budget Law for 2006 and 2007.
The Strategy comprises two parts. In the first part covered is the institutional
and legal framework within which the strategy and analytical review of State
debt at the end of 2004 shall be developed. The second part comprises debt
management policy guidelines and analysis of debt indicators movements based
on desirable indebtedness amount. The second part finishes with the proposal of
project activities, which are possible and needed to be financed by 2007. The
Strategy includes the projects submitted to the Ministry of Finance by line
ministries, state agencies, public enterprises and specific local self-governments.
All the project proposals submitted to the Ministry of Finance are incorporated in
the Strategy. However, annual debt limits of the State do not allow all of them to
be realized in the next three-year period.
Part I: DEBT STATUS OF MONTENEGRO AT THE END OF 2004
1. Institutional and Legal Framework
2. Debt Analyses as of the end of 2004
Part II: NEW DEBT STRATEGY 2005 - 2007
3. Debt Management Policy Guidelines
4. Analyses and projections of movement of debt indicators
5. Project activities
6. Conclusion and Recommendations
4
PART I: DEBT STATUS OF MONTENEGRO
AT THE END OF 2004
1. INSTITUTIONAL AND LEGAL FRAMEWORK
Law on Indebtedness and Public Debt Management, adopted at the beginning of
2004 (Off. Gazette of RoM, no. 11/04) (hereinafter: the Law), unifies the current
regulatory practice and provides clear guidelines with respect to: the manner and
procedures of State indebtedness, the limits of indebtedness, functioning and
responsibility of public sector institutions for public debt management, manner
for issuance of state guarantees and maintenance of data and reporting on
public sector debt.
Foreign and domestic indebting of the State can be done based on a
corresponding document adopted by the Government of the RoM, in accordance
with the limits set in annual budget. State guarantees and counter-guarantees
are issued by the Government, and at explicit request of a lender it can be done
by the Parliament of the Republic of Montenegro. Public debt management and
administration, coordination of activities related to new debt, provision of official
information and preparation of official information for the Government are all
responsibilities of the Ministry of Finance. Sector for public debt management is
placed within State Treasury. In accordance with decisions of the Government,
Minister of Finance signs contracts on indebtedness. The Minister is authorized to
determine a legal entity to issue T-bills and bonds in domestic and international
markets on behalf of the State. The Central Bank of Montenegro is a fiscal agent
of the State. If authorized by the Minister of Finance, it can issue state securities
in domestic and international markets.
The Government is obliged to determine the measures required for adjustment
of the amount of outstanding debt, as well as the ratio of the amount of
outstanding liabilities and GDP according to the methodology applied in EU
countries, which does not exceed the maximum recommended by EU, i.e.
permitted share of consolidated public debt in GDP should not exceed
60%. According to criteria from the Law, public debt represents the
consolidated debt of public sector entities in Montenegro (Government debt,
including guarantees and counter-guarantees, local government debt, extrabudgetary funds debt, public enterprises1’ debt and budget arrears). Maastricht
criteria for public debt exclude the public enterprises – created debt and
guarantees issued by the State for the needs of public enterprises with the
exception of those for which there are grounded estimations that they would be
“called”, i.e. the Government shall be obliged to repay them from the Central
1
Public enterprises whose majority owner is the State – over 50%.
5
Budget (Annex I). So, in accordance with those criteria public enterprises are
excluded from the analyses.2
Debt Policy Committee, the members of which are the Minister of Finance,
Minister of Economy and the President of CBM Council, establishes the proposal
Debt Strategy drafted by the Ministry of Finance based on the needs expressed
by public sector subjects, projections of the movement of the main
macroeconomic variables, impact of the new debt on the budget, projection of
the cumulative debt position at the end of fiscal year and forwards it to the
Government for adoption. The Government proposes Annual Government
Indebtedness Plan, which is a part of the budget, based on Debt Strategy.
All the public sector subjects: the State, public enterprises founded by the State,
local government, extra-budgetary funds and all legal entities where the State is
a majority shareholder – with at least 51% ownership, may take foreign debt
only based on Government decision. Also, all public sector subjects having
foreign debt are to inform the Ministry of Finance on regular bases, of any
withdrawal of credit funds and the repayment schedule. The same applies to all
legal entities outside the public sector if using state guarantees in respect of any
credit. In case the state guarantees are activated due to unfulfilled financial
liabilities by loan end-users, the State is entitled to collect the amount it paid for
from end-users.
2
The major part of public enterprises debt in Montenegro refers to liabilities to foreign loans approved
prior 1992. As the Law on Foreign Debt and Frozen FX Savings envisages this part of liabilities to be
overtaken by the Government of RoM, they are included in the amount of foreign debt of Montenegro.
6
2. ANALYSES OF DEBT POSITION AS OF THE END OF
2004
Public debt of Montenegro which comprises: debt to domestic banks, liabilities in
respect of purchased T-bills, liabilities in respect of issued old foreign savings
bonds, local self-government debt, consolidated arrears of the Budget3 and
withdrawn amount of foreign loans4, amounted to 742.4 million € (hereinafter:
mil €) as of 31st December 2004 (Table 2-1) or 48.4% of GDP. Domestic debt
was 254.1 million EUR or 34.2% of the public debt, while foreign debt was 488.3
million EUR or 65.8%. This amount is not definite primarily due to unfinished
negotiations and debt division5, unfinished negotiations on former Yugoslavia
succession and impossible quantification of explicit liabilities taken over pursuant
to Law on Restitution. According to present estimation, there shall not be huge
changes after the negotiations on division of financial assets and liabilities with
the Republic of Serbia have been finished.
Table 2-1: Public Debt of Montenegro – Amount and Structure in the Period
2002-2004 – (withdrawn foreign credits)
Euro (million)
Year Dome
stic
debt
1
2
2002 255.6
2003 249.7
2004 254.1
GDP
3
1,301.0
1,433.0
1,535.0
Domestic Foreign Foreign
Debt/GD
Debt/G
Debt
P
DP
(2/3)
4
5
19.6%
17.4%
16.6%
893.6
461.5
488.3
(5/3)
6
68.7%
32.2%
31.8%
Public
Debt
Public
Debt/G
DP
(2+5)
(11/6)
8
7
1,149.2
711.2
742.4
88.3%
49.6%
48.4%
Source: Ministry of Finance
Public debt in 2002 amounted to 1,149.2 million EUR or 88.3% of gross domestic
product of Montenegro. That was before rescheduling of debt with IBRD and
Paris Club and before final agreement with the Republic of Serbia on London
Club debt.
Debt of the Central Budget and Extra-budgetary Funds – Pension Fund, Health Fund and Employment
Fund.
4
The foreign debt position refers to withdrawn funds of approved loans. The calculation does not include
foreign loans approved to public enterprises that are considered to be repaid with the funds of the enterprise
– end user, which are guaranteed by the Government. However, gurantees to the public enterprise Port of
Bar, loan from European Investment Bank in the amount of 6 million € and guarantees for the public
enterprise Regional Watersupply of Budva, loan from German Bank for Reconstruction and Development
in the amount of 5.1 million €, are included in debt position. The Government is most likely to have to
repay the major part of the loan for the public enterprise Port of Bar, while the end users for the other loan
are coastal municipalities and Cetinje which according to criteria are to be included in public debt
calculation. For the time being there are no estimations that other guarantees shall be activated towards the
Government or the Central Budget.
5
Commission for Dividing Joint Property, established pursuant to Article 20 of the Law on Constitutional
Charter Implementation, which should also divide NBS liabilities, still has not divided foreign debt (nonallocated and part of allocated foreign debt) between Serbia and Montenegro.
3
7
The largest portion of public debt refers to inherited long-term obligations from
the old systems (former SFRY and FRY). This primarily refers to foreign debt
taken over pursuant to Law on Settling Claims and Liabilities Based on Foreign
Debt and Old Foreign Currency Savings, which at the end of 2004 amounted
434.7 million EUR, 89% of foreign debt or 58.6% of the public debt, mostly IBRD
and Paris Club loans. Namely, except for credit arrangements with international
financial institutions (IMF, IBRD and other) and bilateral credit arrangements
between SFRY and other governments, majority of foreign loans, concluded by
banks and companies, represented their commercial debt not guaranteed by
SFRY or National Bank of Yugoslavia. Starting from 1983, when SFRY accepted
the process of multilateral rescheduling and foreign debt liabilities’ refinancing
due to foreign exchange illiquidity, complete foreign debt (as well as new foreign
credits concluded) was guaranteed by SFRY and NBY and thus it was converted
to contingent public debt. This debt consists of allocated debt of loan users from
the Republic of Montenegro and a part of non-allocated debt (5.88%) contracted
or guaranteed by former SFRY and taken over by FRY (36.52% of non-allocated
debt of SFRY).
Beside old foreign debt, “inherited” public debt also consists of old foreign
currency savings obligations, taken over by the same law. Liabilities for old
foreign currency savings at the end of 2003 were 127 million EUR6, and at the
end of 2004 they were 123 million EUR or 16.6% of public debt. Therefore, the
inherited liabilities from the old system represented 75.2% of total public debt of
Montenegro at the end of 2004. The remaining 24.8% refer to new foreign
borrowings in the period 2000-2004 and liabilities based on short-term
borrowing, loans and T-bills.
The structure of domestic debt can be seen in Table 2-2. In addition to liabilities
in respect of government bonds of foreign currency savings, the structure of
domestic debt comprises consolidated budget liabilities, bank loans, issued T-bills
and local self-government debt.
Table 2-2. Amount and structure of domestic debt of Montenegro in the period
2002-2004
Euro (million)
Year Loans T-bills
Old
Budget
foreign arrears
savings
liabilities
Local self- Domestic
government
debt
debt
GDP
(5/6)
(2+3+4+5+6)
1
2002
2003
2004
2
3
18.2
19.5
8.9
9.8
19.7
37.4
4
127
127
123
5
100.6
83.5
61.8
6
7
0.0
0.0
23.0
Domestic
debt /GDP
8
255.6 1,301.00
249.7 1,433.00
254.1 1,535.00
9
19.65%
17.42%
16.55%
6
The amount does not include interest which is 2% annually in accordance with the Law on settlement of
liabilities in respect of foreign debt and old foreign currency savings of citizens (Off. Gazette of RoM
55/03)
8
Table 2-3 is showing the amount and schedule of public debt movement with
total guarantees issued by the Government of Montenegro in respect of foreign
credits where public enterprises are also included. From the Table it can be seen
that total amount of “old” debt and issued guarantees for the needs of public
enterprises and budget users at the end of 2004 was 589.2 million € while at the
same time 502,4 million € was withdrawn. The difference in the amount of 86.8
million € represents already contracted funds to be withdrawn during the
subsequent period.
Table 2-3. Structure and schedule of public debt of Montenegro 2002-2004 –
with guarantees for foreign credits
Year
Domesti
debt
1
2
Foreign
Withdrawn
debtamount of
guarantees foreign debt
Public
Debt
(2+4)
2002
2003
2004
255.6
249.7
254.1
3
941.2
539.2
589.2
4
5
893.6
472.4
502.4
1,149.2
722.1
756.5
Source: Ministry of Finance
Total public debt with included public enterprises’ liabilities amounts to
756.5million € which is for 14.1 million € higher in comparison to public debt
calculated according to Maastricht criteria.
9
PART II: NEW DEBT STRATEGY 2005-2007
3. PUBLIC DEBT MANAGEMENT POLICY GUIDELINES
Based on analyses of data on debt of Montenegro it can be concluded that
domestic debt is significantly smaller than foreign debt (domestic: 254.1 million
EUR and foreign: 488.3 million EUR). However, the structure of domestic debt is
showing significant participation of T-bills and bank loans, which are extremely
expensive forms of financing. Average interest rate on T-bills for 2004 was about
9%, while effective interest rate on bank loans was 14-30%. Budget arrears in
the amount of 61.8 million EUR do not have interest-bearing costs, but they are
an obstacle to activities taking place in the line: budget – economy – citizens.
The objective of debt management policy is, among other things, to set
guidelines for elimination of the most risk-bearing categories of domestic debt –
T-bills and bank loans as an obstacle to further growth of capital budget
investments and long-term sustainability of the budget in the environment of
growth of investments.
Reorganization of T-bills Issuance
T-bill issuance program started in 2001 for the purpose of overcoming seasonal
budget illiquidity. However, due to absence of alternative funding sources, T-bills
became a continuing and very expensive form for covering budget deficit. High
interest rate – about 9% – and short maturity from 28 to 182 days, which exposes
the budget to significant risk from the aspect of liquidity, indicate the necessity for
elimination of the current manner of issuing T-bills. By the end of 2005 these
liabilities shall be brought to minimum amount. The source of funds for coverage
of these liabilities shall be from the privatization receipts.
By bringing such a form of indebting to minimum, significant savings in the State
Budget would be realized. According to current analyses of the market and
according to credit rating of Montenegro (BB), determined by foreign agency
Standard & Poors, the assessment is that Montenegro could take long-term debt
in the international capital market at the rate below 6% by issuing mid-term
bonds. Funding based on project principle is even more favorable. Financial
conditions with European Investment Bank on long-term loans – 15 years,
amount to Euribor + 0,45 – 0,60% while with European Bank for Reconstruction
and Development interest rate equals to Euribor + 1%.
Repayment of Bank Loans
Domestic bank loans are the most expensive form of budget financing. For that
reason, the plan is to repay the whole amount of domestic loans to commercial
banks and other institutions by the end of 2005, according to the schedule of
maturity of loans. The source for covering these liabilities shall be the receipts
from privatization.
10
Repayment of Budget Arrears
Arrears of the Budget, which amounted to 61,8 million EUR at the end of 2004
shall be repaid during the following years according to the possibilities within the
planned budget deficit while new liabilities won’t be accumulated. The source
shall be the receipts from privatization and higher realization of budget revenues.
The repayment projection of these liabilities is very conservative and significantly
lower level is expected at the end of 2005.
Establishment of key debt indicators as guidelines for debt and
liquidity management
Key indicators are:
1. Total debt in comparison to budget revenues
2. Paid interest in comparison to budget revenues
3. Total debt servicing (paid part of the principle and interest) in comparison
to budget revenues
4. Total debt in comparison to gross domestic product
Investment in infrastructure shall increase in accordance with
established limits
Successful application of debt management policy shall establish conservative
and long-term sustainable debt position. Owing to that, permanent increase of
investments in the infrastructure based on Government priorities shall be
possible. In case of elimination of most risk-bearing categories of domestic shortterm debt, moderate increase of fiscal deficit shall not threaten macroeconomic
stability or significantly expose the State to potential economic shocks.
Basic budget7 shall remain balanced
Planned increase of expenditures for capital investments during the following
three-year period, and repayment of the budget arrears shall not increase the
planned consolidated fiscal deficit. It is planned that in 2005 consolidated deficit
should amount 2.99%, 3.00% in 2006 and 2.97% of GDP in 2007. As to maintain
the established limits of key debt indicators, the basic budget must be balanced.
Deficit projections may vary depending on final projections of the Budget Law for
2006 and 2007.
Reserves for capital investments and preparation of capital budget
Reserves for capital investments shall be formed as to provide adequate funding
for capital programs envisaged by the budget and avoid over-exposure to market
movements. Development of capital budget, which has already started, shall
enable better planning of expenditures for capital investments and preparation of
the strategy for funding projects.
7
Basic budget comprises current revenues and current expenditures, without specific revenues and
expenses that occur only in some years (repayment of arrears of the budget, additional investment in
infrastructure – over the planned level...)
11
4. ANALYSES AND PROJECTIONS OF DEBT
INDICATORS MOVEMENTS
The following Table (Table 4-1) indicates the projections of key debt
indicators taking in consideration the guidelines of debt management policy
and the latest projections of mid-term fiscal indicators.
The meanings of specific items from the Table are as follows:
a. Deficit of basic budget indicates fiscal balance excluding repayment
of debt, repayment of interest and repayment of arrears of the
budget;
b. Primary balance is budget deficit without interest costs;
c. Gross funding requirements including budget deficit and repayment
of debt less donations;
d. This category indicates planned scope of receipts from privatization
to be used for reduction of domestic commercial debt –bank loans
and T-bills, and partly for budget arrears8;
e. Projections of GDP amount for the period 2005 – 2007 have been
undertaken from the Economic Reform Agenda in Montenegro
2002-2007;
f. Envisaged withdrawals based on previously signed loans.
g. Indicates amount of new debt required for balancing data based on
these assumptions, without specifically stating the sources of funds.
It has been calculated as difference between gross funding
requirements and withdrawal based on already signed loans;
h. Cumulative new debt for three-year period.
Projection of consolidated budget deficit is planned to be 4.13% to 3% on annual
level in the period 2005-2007.
8
Given is a very conservative projection of the repayment of debt in respect of budget arrears. This amount
is expected to be significantly lower in the period 2005-2007 and possibly completely eliminated.
12
Table 4-1. Schedule of movements of debt of Montenegro
Revenues
2004
2006
2007
2005 Plan
Realization
Projection Projection
Total revenues
372.78
435.46
455.26
474.80
Expenditures
Salaries and other income
Material and services
Transfers
Subsidies
Other expenditures and reserves
Expenses for capital investments/programs
Given loans
(a) Basic budget deficit
Activated guarantees
Rapayment of budget arrears
164.38
46.90
103.78
8.48
23.93
12.65
7.18
5.48
10.61
0.00
172.35
62.26
141.67
6.28
15.22
36.22
7.82
-6.36
4.00
0.00
192.50
60.20
138.26
6.00
14.90
35.74
4.00
3.66
0.50
5.00
192.50
68.00
140.00
8.00
11.00
43.50
4.00
7.80
0.50
0.00
0.00
-5.13
24.03
-29.16
-1.90%
23.50
-33.86
15.27
-49.13
-2.99%
30.00
-31.84
21.00
-52.84
-3.00%
42.00
-34.70
21.00
-55.70
-2.97%
6.02
6.95
28.23
2.65
8.70
3.69
56.79
6.98
8.70
0.00
68.52
9.35
8.70
0.00
73.75
3.54
46.30
5.00
0.00
6.45%
8.06%
48.36%
1535.0
199.15%
742.4
254.1
8.90
37.40
123.00
23.00
61.80
488.3
488.3
488.3
3.51%
6.11%
45.09%
1644.0
170.23%
741.28
198.84
0.00
0.00
117.04
20.00
61.80
542.44
509.15
485.65
4.61%
8.06%
43.27%
1759.0
167.18%
761.12
183.14
0.00
0.00
108.34
18.00
56.80
577.98
506.17
452.67
26.00
30.00
53.50
38.52
71.81
4.42%
8.22%
43.50%
1873.3
171.61%
814.82
172.44
0.00
0.00
99.64
16.00
56.80
642.38
538.82
443.32
Additional expenses for capital investments
(b) Primary balance
Payment of interest
Deficit
Deficit/GDP
Matured liabilities in respect of foreign debt
Payment of foreign frozen savings
Deduction in the amount of donations
(c) Gross funding requirements
(d) Used revenues from privatization
Payment of interest/revenues
Total costs of servicing debt/Revenues
Debt/GDP
(e) GDP
Debt/Revenues
Total debt
Domestic debt
Loans
T-bills
Old foreign frozen savings
Local Selfgovernment Debt
Budget Arrears
Foreign Debt
Foreign debt (net amount)
Foreign debt (current)
Written off debt to Paris Club
(f) Foreign debt by projects
Cumulative amount of foreign debt by proje.
(g) Net debt requirements
(h) Cumulative amount of new debt
23.50
23.50
33.29
33.29
42.00
95.50
31.75
103.56
I
Source: Ministry of Finance
13
Total debt/Gross Domestic Product
This indicator is considered to be the most important indicator of debt
sustainability. Total debt comprises the debt of the State, municipalities and
extra-budgetary funds, and includes guarantees for which there is an assumption
that they shall be activated. Previously mentioned were the guarantees in
question. According to Maastricht criterion, total debt must not exceed 60% of
GDP. As shown in the Table, this indicator is far below the upper limit of 60%.
Although it is difficult to do a direct comparison, according to data of rating
agency Fitch, total debt to GDP for 2004 amounted to 51.8% for countries with
credit rating BB.
In case of Montenegro reliance on this indicator may be problematic due to
insufficiently diversified export.
Total debt/Budget revenues
This indicator may be more reliable in case of Montenegro than is the case with
the previous indicator. As in the case of previous indicator Montenegro is
currently in a favorable position and the value of the indicator is lower than
average value for the countries with the rating BB (which amounted to 256.1% in
2003)9.
Interest costs/Budget revenues
This indicator is useful to measure the impact of debt servicing on budget. The
value of the indicator for Montenegro is favorable due to concessional conditions
of foreign loans. Restructuring of debt portfolio and abolishment of expensive
domestic indebtedness should contribute to improvement of the value of this
indicator in future.
Total debt servicing/Budget revenues
This indicator includes repayment of debt principle and may be useful for pointing
out the potential problems due to large amounts of debt repayments. In case of
Montenegro the debt repayment schedule is relatively favorable, so this indicator
is not of crucial significance. However, since the Strategy is going to deal with
various funding sources this indicator shall be important in future. Rating
agencies usually use this indicator in comparison with export not in comparison
with budget revenues. In case of Montenegro there is a dominant role of
aluminum in export and due to that reason this indicator may be subject to
changes caused by activities of only one economic sector.
9
The latest data of Fitch Agency refer to 2003
14
5. PROJECT ACTIVITIES
5.1.
REVIEW OF CURRENT INVESTMENT PROJECTS
This part which is dealing with analyses of the current and potential investment
activities shall also include the public enterprises which are the end users of the
loans, but that amount is not included in the calculation of the public debt.
Intensive indebtedness of Montenegro with foreign creditors, mainly for
infrastructure projects, started in 2000. At the end of 2004 main creditors were:
European Investment Bank, European Bank for Restructure and Development,
German Credit Bank for Restructure and Development and IDA, World Bank
branch. Total amount of approved and withdrawn project loans as of the end of
2004 can be seen in the following Table.
Table 5-1: Review of current investment projects as of 31/12/04
EURO (million)
Contracted
amount
Creditor
World Bank (IDA)
Withdrawn
amount
10.6
1. Stabilization in supplying electric power
4.6
2. Protection of surrpundings of coastal area
6.0
European Investment Bank (EIB)
Remaining
amount
1.3
0.9
0.4
78.0
9.3
3.7
5.6
32.5
45.5
1. Urgent rehabitalization of traffic
16.0
13.0
3.0
Port of Bar
6.0
6.0
0.0
Rehabilitation of roads
10.0
7.0
3.0
2. Project of European roads - Sozina Tunnel
24.0
9.3
14.7
3. Modernization of airports in Montenegro
12.0
0.0
12.0
4. Reconstruction of railways in Montenegro
15.0
7.0
8.0
5. Reconstruction of electric power industry
11.0
3.2
7.8
European Bank for Reconstruction and
Development (EBRD)
14.0
3.0
11.0
1. Modernization of airports in Montenegro
11.0
1.7
9.3
2. Advisor for sale of KAP
3.0
1.3
1.7
Credit Bank for Reconstructure - Germany
(KFW)
8.7
4.9
3.8
1. Improvement of watersupply for coastal area and Cetinje
5.1
4.9
0.2
2. Reconstruction of electric power plant Perućica
3.6
0.0
3.6
TOTAL
111.3
41.7
69.6
Source: Ministry of Finance
Out of total contracted amount of 111,3 mil.€ loans realized has been 41,7
million, and 69,6 mil.€ is still to be withdrawn. The major part of those funds
shall be withdrawn during 2005-2006.
15
5.1.1.
WORLD BANK – IDA (International Development Agency)
In 2002 and 2003 Montenegro contracted 10,6 mil.€ in special withdrawal rights
(SWR) with the World Bank, i.e. its affiliate IDA – International Development
Agency:
Ministry of Economy
1. Project of stabilization in supply of electric power (Emergency Stabilization
of Electricity Supply Project), in the amount of 4,56 mil.€ out of which 0,9
mil.€ has been withdrawn.
Ministry of Environment and Urban Development
1. Project for protection of surroundings of coastal area in Montenegro
(Montenegro Environmentally Sensitive Tourist Areas Project – MESTAP)
in the amount of 5,6 mil.€ – 0,4 mil.€ withdrawn.
In addition to the mentioned project credits, the Government of Montenegro is
the user of program IDA credits, which in accordance with law are not
constituent part of the analysis in this Strategy. Program IDA credits are: Project
of Health Protection Improvement in Montenegro - approved 4,9 million SDR,
Project of Pension Administration Improvement in Montenengro - approved 3,5
million SDR, Project of Education System Reform in Montenegro – approved 3,3
million SDR. In addition to these, Montenegro is the user of loans for structural
adjustment (SAC) as a mechanism for direct support to the Budget of the
Republic. Montenegro used all of the funds in respect of SAC I in the amount of
11,9 million SDR in 2003 and 2004. Montenegro used the first installment SAC II
in the amount of 6,15 million SDR at the end of 2004. Withdrawal of the second
installment in the same amount is expected by the end of 2005 upon the
fulfillment of specific conditions by the Government of Montenegro (privatization
of Podgorička Bank, acceptance of Montenegro in Egmont Group and resolution
of property taken over from privatization of Montenegrobank a.d. Podgorica – as
key conditions).
5.1.2. EUROPEAN INVESTMENT BANK
During 2001-2002 Montenegro contracted funding
infrastructure projects with European Investment Bank:
of
a
few
different
Ministry of Transport
1. Urgent Transport Rehabilitation in the amount of 16 mil.€. This credit is
intended for rehabilitation, reconstruction, dislocation of the (road) route,
protection of slides, stabilization of slopes and widening of of road sections
in the amount of 10 mil.€ and reconstruction of the main watershed of
16
Port of Bar in the amount of 6 mil.€. Port of Bar withdrew total amount of
6 mil.€ while for the other project withdrawn was 7 mil.€. in total.
2. Railways Rehabilitation in the amount of 15 mil.€ – withdrawn 7 mil.€
3. During 2004 Montenegro signed the Contract on the credit for airports
modernization with EIB in the amount of 12 mil.€ and hasn't withdrawn
any funds in that respect yet.
4. During 2004 signed was the contract for funding the project European
Roads, i.e. for construction of Sozina Tunnel, in the amount of 24 mil.€.
Withdrawn 9,3 mil.€
Ministry of Economy
1. Power Sector Reconstruction in the amount of 11 mil.€. Withdrawn 3,2
mil.€.
5.1.3. EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT
Montenegro signed 2 credits with European Bank for Reconstruction and
Development in 2004:
Ministry of Transport
1. Contract on the credit intended for modernization of airports in Podgorica
and Tivat in the total amount of 11 mil.€ – withdrawn 1,7 mil.€.
Ministry of Economy / Agency for Reconstruction of Economy and Foreign
Investments
1. Contract on pre-privatization loan for Aluminum Company intended for
costs of advisers for privatization, in the amount of 3 mil.€ – withdrawn
1,3 mil.€.
5.1.4. GERMAN CREDIT
DEVELOPMENT
BANK
FOR
RECONSTRUCTION
AND
With this bank two credit arrangements were signed.
Ministry of Economy
1. Contract related to reconstruction of hydro electric power plant Perućica in
the amount of 3,6 mil.€, was signed in 2003 and there haven't been any
withdrawals yet.
Ministry of Environment and Urban Development
1. Project of improvement of water supply for Montenegrin coast and Cetinje
in the amount of 5,1 million € (10 mil DEM) was signed in 2000 and until
the end of 2004 4,9 mil.€ was signed.
17
5.2.
FUTURE INVESTMENT PROJECTS
Based on analyses given in the Table 4-1 sustainable level of new debt for the
purpose of funding capital investments is 23.5 mil € for 2005, 30 mill. € for 2006
and 42 million € for 2007. However, there are restrictions by IMF with regard to
total amount of indebtedness, including public enterprises, the details of which
shall be further elaborated below. Negotiations are in process with a few
international financial institutions for the purpose of facilitating credits. In
addition to these institutions, negotiations are in process with governments of
the Republic of Poland and Republic of Hungary.
5.2.1. EUROPEAN INVESTMENT BANK
European Investment Bank provides possibilities for credit arrangements to be
signed in more than one project given the restrictions imposed to Montenegro by
IMF arrangement.
Ministry of Transport
1. Ministry of Transport, for the purpose of repairing the status of road
network, which primarily refers to the halt of rapid deterioration of roads
on specific sections, is negotiating with EIB a credit in the amount of
23,00 mil €, intended for remaining investment maintenance. The credit
for investment maintenance would be realized during 2005 and 2006.
Signing and withdrawing of specific projects may take place from 2006 to
2009.
2. For completion of the Vrmac Tunnel, negotiations are in process for a
credit in the amount of 5,00 mil €. Signing and withdrawing of specific
projects may take place from 2006 to 2009.
3. For infrastructure projects at the level of local self-governments in
Montenegro in the amount of 11mil.€. Signing and withdrawing of specific
projects may take place from 2006 to 2009.
4. For rehabilitation of railway infrastructure, negotiations are in process with
EIB on the possibility of getting the credit in the amount of 28,90 mil €.
The loan would be used to fund:
- building infrastructure, in the amount of 22.87 mil €,
- electric devices and plants, in the amount of 5.36 mil €,
- information system, in the amount of 0.68 mil €.
5. For procurement of vehicles for the needs of railway traffic, negotiations
are in process for realization of the credit in the amount of 12,40 mil €.
The loan would be used to fund:
- train-2 units, in the amount of 7.60 mil €,
- freight train - 45 units, in the amount of 3.60 mil € and
- supporting scraper - 1 workshop, in the amount of 1.20 mil €.
18
6. Credit for modernization of flight control between Serbia and Montenegro
which borrower is Agency for flight control between Serbia and
Montenegro. The credit was signed in the second quarter of 2005 in the
amount of 36 mil € out of which 8% of the guarantee refers to
Montenegro according to participation in initial capital of the Agency or
2.88 mil €.
7. Project of mini ring road around Podgorica, which preliminary assessed
value is 20 million €.
Deputy Prime Minister Cabinet for Economic Policy and Economic
Development
1. Credit for projects referring to small and medium size enterprises, in the
amount of 20,00 mil €. The funds, in addition to financing projects from
the area of small and medium size enterprises –15 mil. €, are also
intended for funding small infrastructure projects in municipalities – 5
mil.€.
Ministry of Environment and Urban Development
1. Adaptation of the current plant for purification of waste waters in Nikšić.
This investment refers to equipping and reconstruction of the current
building facilities with machine and electric equipment. The value of the
investment amounts around 4,54 mil €. In addition to EIB, the Project was
presented to the Government of Germany, Government of Spain and
Government of the Kingdom of Norway.
2. The project for regulation of waste water system and improvement of
water supply in Montenegro which preliminary assessed value is 57 million
€ based on envisaged investments in phase I of the Master Plan for
regulation of waste waters in Montenegro. Signing and withdrawing of
specific projects may take place by 2010.
5.2.2. EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT
Ministry of Transport
1. Project of Reconstruction of regional roads in Montenegro (Road M-2
Mioska –Kolašin and Road M-3 Cetinje-Budva), in the amount of 11,50 mil
€. In London, on 11th and 12th April 2005 with EBRD representatives held
were the negotiations on the loan for realization of this project. Authorized
members of delegations from Montenegro and EBRD signed the the
Agreement on the loan on 15th July 2005 in Podgorica.
2. Loan for modernization of flight control between Serbia and Montenegro
which borrower is the Agency for flight control between Serbia and
Montenegro. The loan was signed in the second quarter of 2005 in the
amount of 33,5 mil € out of which 8% of the guarantee refers to
Montenegro according to participation in initial capital of the Agency or
2,68 mil €.
19
3. Project for Development of infrastructure in Herceg Novi municipality, in
the amount of 2,00 mil €.
Ministry of Environment and Urban Development
1. Project of waste waters management in the coastal area of the Republic
of Montenegro, in the amount of 10,00 mil.€.
DEVELOPMENT BANK OF THE EUROPEAN COUNCIL
Ministry of Environment and Urban Development
1. With the Development Bank of the European Council considered is the
possibility of getting a loan for realization of the Project «2000 solidarity
apartments«. The funds would be withdrawn in the period 2005-2008.
The Action Plan envisages total investment of 50 mil.€, where local selfgovernments would participate with 15 mil.€ for land and infrastructure,
while 35 mil.€ would be the credit debt.
5.2.3. GERMAN CREDIT
DEVELOPMENT
BANK
FOR
RECONSTRUCTION
AND
Deputy Prime Minister Cabinet for Economic Policy and Economic
Development
1. Credit for water supply improvement in Montenegrin coastal area and
Cetinje in the amount of 10,00 mil.€. The loan is envisaged as a
continuation of funding of improvement of water-supply of Montenegrin
coastal area and Cetinje which commenced in 2000. The first loan from
KFW in the amount of 5.1 mil. € is almost fully used.
5.2.4. OTHER PROJECTS
Ministry of Environment and Urban Development
1. Reconstruction of devices for purification of waste waters in Podgorica.
Realization of this project is planned in phases. According to data from the
Ministry of Environment and Urban Development, there is a realistic
possibility for the first phase, which refers to reconstruction of the old
plant in Podgorica, to be realized during 2005 by the funds of the loan, in
the value of approximately 1.30 mil.€, within PEIP Program (Priprity
Environmental Reconstruction Program), which is implemented by REC
(Regional Environment Center for Central and Eastern Europe) and for
which some of the members of ISG (Infrastuctor Stering Group), such as
WB, EBRD, EIB, European Commission, will provide funds at more
favorable conditions.
2. Connection of wastewaters of the hotel complex Velika plaža to sewage
system –Ulcinj. The Project is in accordance with the master plan for
drainage and purification of wastewaters of Montenegrin coastal area and
20
Cetinje municipality. The value of the investment is assessed to be about
240.000 €.
3. Rehabilitation of Pump Station Port Milena –Ulcinj. The value of the
investment is assessed to be 452.000 €. Both projects, which refer to
Ulcinj municipality, were presented for realization within activities of the
Business Council of the Government of Germany and Council of Ministers
of Serbia and Montenegro, Canadian Embassy, ”Plane Station Group” from
Great Britain.
4. Construction of recycle center for Podgorica waste area »Livade«. The
value of the investment is assessed to be 5.00 mil.€. Funds for realization
of this project are provided by the loan approved by the Government of
the Kingdom of Spain to Serbia and Montenegro.
5. Development of feasibility study for regional sanitary waste area for 4
locations, as well as for location of waste area for dangerous substances.
It is assessed that for development of the mentioned study, it will be
necessary to provide funds in the amount of 1.00 mil.€.
Ministry of Transport/ Ministry of Agriculture, Water Supply and Forestry
1. Reconstruction of railway infrastructure and procurement of agricultural
machines and equipment. The amount of 6 mil.€ is committed for each
ministry. It is a commodity loan of the Government of the Republic of
Poland under extremely favorable conditions – interest rate of 0,70% and
repayment period is 15 years. Signing of the contract is planned during
2005.
Ministry of Education
1. Negotiations with the Government of the Republic of Hungary with regard
to the loan for building of a primary school is in process. Signing is
expected during 2005. Planned amount of the loan is 15 mil. €
21
5.2.5. RECAPITULATION
Table 5-2: Indicated funding requirements for investments of public sector
subjects in Montenegro for the period 2005-2007
EURO (million)
Creditor
European Investment Bank
177.30
1. Modernization of flight control in S&CG
2.80
2. Outstanding investment maintenance
23.00
3. Reconstruction of Vrmac Tunnel
5.00
4. Infrastructure projects at local self-gov. level
11.00
5. Water supply and waste waters regulation
57.00
6. Railway infrastructure reconstruction
28.90
7. Vehicle stock - JP Željeznica CG
12.40
8. Mini ring road around Podgorica
20.00
9. Credit line for SME and local infrastructure
20.00
European Bank for reconstruction and development
26.18
1. Reconstruction of regional roads
11.50
2. Improvement of infrastructure in Herceg Novi
2.00
3. Regulation of waste waters on the coast
10.00
4. Modernization of flight control in S&CG
2.68
World Bank
1. Project for watersupply of the coast
17.00
17.00
Credit Bank for Reconstruction – Germany
1. Improvement of watersupply on the coast
10.00
10.00
Development Bank of the European Council
1. Project "2000 solidarity apartments"
35.00
35.00
Other
34.99
1. Regulation of waste waters - Podgorica
1.30
2. Regulation of waste waters - Ulcinj
0.24
3. Construction of pump station Port Milena - Ulcinj
0.45
4. Recycle center "Livade" Podgorica
5.00
5. Feasibility study - regional waste areas
1.00
7. Railway and agriculture - Polish loan
12.00
8. Building of schools - Hungarian loan
15.00
TOTAL
300.47
Source: Responsible Ministries of the Government of Montenegro
In the Table 5-2 given is the summary review of investment proposals forwarded
to the Ministry of Finance for consideration and further procedures.
22
5.3.
INVESTMENT PROJECTS OF PUBLIC SECTOR FOR THE PERIOD
2005-2007
The previous section indicates the potential investment projects of the public
sector for the period 2005-2007 which have been submitted to a specific
department in the Ministry of Finance, as envisaged in the Law. In accordance
with the International Monetary Fund, loans from European Investment Bank
and European Bank for Reconstruction and Development belong to the nonconcessional category, while the annual limit of commercial loans for Montenegro
amounts to 32 mil.$. That is the amount for which Montenegro issues sovereign
guarantees for commercial creditors regardless whether they are public or
private enterprises or budget users. On the other hand, the scope of debt in
respect of concessional conditions is not limited. Limits refer to the capability of
the state budget to regularly service the maturing liabilities in respect of those
loans. The limits are given in Table 4-1 under the item additional expenditures
for capital investments. .
In the Table 5-3 given is the review of investment projects of public sector
subjects in Montenegro to be financed during 2005-2007. Detailed explanations
of proposed projects are given in the section 5.2. Selection of projects for 2005
is based on the following criteria:
- projects for which the negotiations started in the previous period: project of
Modernization of flight control with EIB and EBRD, Project of building schools
with the Government of the Republic of Hungary.
- projects which are realized under extremely favorable financial conditions:
Project of Modernization of equipment for Railway Company of Montenegro and
procurement of equipment for agro-industry in Montenegro - commodity loan
from the Government of the Republic of Poland.
- projects of Emergency resolution of road infrastructure in the Republic: ProjectReconstruction of Regional Roads with EBRD, project of Reconstruction of the
Vrmac Tunnel with EIB, project Outstanding investment maintenance with EIB.
- projects of emergency resolution of infrastructure problems on the territory of
municipalities: project of Municipal infrastructure with EIB, project of regulation
of wastewaters in Montenegro and project of Construction of recycle center
Livade in Podgorica.
Table 5-3: Review of investment projects of public sector subjects in Montenegro
to be financed during the period 2005-2007
23
EURO (million)
Creditor
annual debt limit - non-concession
difference (debt limit - debt)
T O T A L NON-CONCESSIONAL
European Investment Bank
Total
206.28
180.10
Approved indebtedness amount
2005
26.5
9.52
16.98
2.80
2006
26.5
26.50
0.00
0.00
2007
26.5
26.50
0.00
0.00
Remaining
189.30
177.30
1. Modernization of flight control in S&CG
2.80
2. Outstanding investment maintenance
23.00
3. Reconstruction of Vrmac Tunnel
5.00
5.00
4. Infrastructure projects at local self-gov. level
11.00
11.00
5. Water supply and waste waters regulation
57.00
57.00
6. Railway infrastructure reconstruction
28.90
28.90
7. Vehicle stock - JP Željeznica CG
12.40
12.40
8. Mini ring road around Podgorica
20.00
20.00
9. Credit line for SME and local infrastructure
20.00
20.00
1. Reconstruction of regional roads
11.50
2. Improvement of infrastructure in Herceg Novi
2.00
2.00
3. Regulation of waste waters on the coast
10.00
10.00
4. Modernization of flight control in S&CG
2.68
2.80
0.00
1. Project for watersupply of the coast
14.18
11.50
0.00
0.00
2.68
96.99
17.00
0.00
5.00
0.00
12.00
0.00
0.00
0.00
0.00
0.00
0.00
91.99
17.00
17.00
Credit Bank for Reconstruction
17.00
10.00
1. Improvement of watersupply on the coast
10.00
1. Project "2000 solidarity apartments"
35.00
Development Bank of the European
Council
0.00
23.00
European Bank for reconstruction and
development
26.18
T O T A L CONCESSIONAL
World Bank
0.00
10.00
10.00
35.00
Other
35.00
35.00
34.99
5.00
0.00
0.00
29.99
1. Regulation of waste waters - Podgorica
2. Regulation of waste waters - Ulcinj
1.30
1.30
0.24
0.24
3. Construction of pump station Port Milena - Ulcinj
0.45
4. Recycle center "Livade" Podgorica
5.00
5. Feasibility study - regional waste areas
1.00
1.00
7. Railway and agriculture - Polish loan
12.00
12.00
8. Building of schools - Hungarian loan
15.00
TOTAL
0.45
5.00
303.27
0.00
0.00
0.00
15.00
21.98
0.00
0.00
281.29
Table 5-4 indicates the plan of withdrawal of credit funds for the period 20052007 for users who according to Maastricht criterion are to be included in the
24
calculation of the public debt (without public enterprises). According to the
projections of the Ministry of Finance, with keeping the consolidated budget
deficit on 3,0% for the planned period, the upper limit of withdrawal of funds for
the amounts of the projects: 23,5 mil. € in 2005, 30,0 mil.€ in 2006 and 42,0
mil.€ in 2007. Priority in withdrawal belongs to already signed loans since, inter
alia, there is specified contract liability of withdrawal of funds by a certain
deadline.
During 2005 most withdrawals shall be in respect of EIB loans for construction of
Sozina Tunnel – 14.7 mil.€. EBRD funds shall be spent for reconstruction of
regional roads - Obzovica project - 2,8 mil.€. According to the project of the
World Bank – for protection of surroundings of the coastal area 1 mil.€. shall be
withdrawn.
For 2006 continued shall be withdrawals from EBRD for reconstruction of
regional roads - project Mioska - Kolašin - 4 mil.€. Continued shall be
withdrawals in respect of the World Bank loan: protection of the surrounding of
the coastal area 1 mil.€. For the construction of recycle center Livade in
Podgorica 1 mil.€ shall be withdrawn.
For 2007 envisaged is the completion of withdrawing funds from EIB for
reconstruction of regional roads - project Mioska - Kolašin - 4,7 mil.€.
Withdrawals shall continue for the World Bank loan: protection of surrounding of
coastal area 1 mil.€ respectively. For construction of recycle center Livade in
Podgorica 2 mil.€. shall be withdrawn.
25
Table 5-4: Withdrawal Plan of project loans in the period 2005-2007
EURO (million)
creditor
Annual borrowing limit - total
Difference (withdrawn - approved)
TOTAL NON-CONCESSIONAL
European Investment Bank
Remaini
ng
amount
186.10
162.60
Rehabilitation of roads network
Plan of annual withdrawal of
funds
Other
2005 2006
2007
23.50
-2.00
20.50
17.70
42.00
-36.30
4.70
0.00
30.00
-25.00
4.00
0.00
145.90
133.90
3.00 3.00
0.00
0.00
0.00
Project of European roads – Sozina Tunnel
14.70 14.70
0.00
0.00
0.00
Outstanding investment maintenance
23.00
23.00
5.00
5.00
Reconstruction of Vrmac Tunnel
Infrastructure projects at local self-gov. level
11.00
Reconstruction of railway infrastructure
28.90
28.90
Regulation of waste water system
57.00
57.00
Mini ring road around Podgorica
20.00
20.00
European Bank for Reconstruction and
Development
23.50
Reconstruction of regional roads
11.50 2.80
Improvement of infrastructure in Herceg Novi
4.70
85.59
22.60
Protection of surroundings of the coastal area
5.60
Project of watersupply of the coastal area
17.00
Credit Bank for Reconstruction
2.00
10.00
1.00 1.00
1.00 1.00
1.00
10.00
1.00
1.00
1.00
1.00
35.00
17.00
0.00 0.00
0.00
17.99
10.00
10.00
0.00 0.00
0.00
35.00
Other
82.59
19.60
2.60
10.00
European Council Bank for
Development
12.00
0.00
10.00
TOTAL CONCESSIONAL
World Bank
Project "2000 solidarity apartments "
4.00
4.70
2.00
Regulation of waste waters on the coast
Improvement of water supply on the coast
2.80 4.00
35.00
35.00
0.00 0.00
0.00
17.99
Recycle center "Livade" Podgorica
5.00
Regulation of waste waters - Ulcinj
0.24
0.24
Construction of pump station Port Milena - Ulcinj
0.45
0.45
Regulation of waste waters - Podgorica
1.30
1.30
Feasibility study – regional waste areas
1.00
1.00
Building of schools – Hungarian loan
15.00
TOTAL
271.69
0.00
1.00
2.00
2.00
15.00
21.50 5.00
5.70
228.49
Note: Italic indicates projects for which the loan
contracts haven't been signed yet
26
6. C O N C L U S I O N
Based on the submitted proposal of the Debt Strategy of Montenegro by the
Debt Committee, the Government of the Republic of Montenegro adopted the
following conclusions:
1. Adopted is the Debt Strategy of Montenegro for the period 2005-2007.
2. Ministry of Finance is obliged, based on this Strategy to develop State
Borrowing Program that will be a constituent part of the Budget Law for
2006 and 2007.
3. Ministry of Finance is obliged to take debt once a year, during three-year
plan period, and to review the planned projects and inform the
Government on the process of realization of projects.
4. Ministry of Finance is obliged to continue with institutional fostering of the
sector for debt management in personnel, technical and organizational
respect.
5. Responsible Ministries are obliged to direct to the Ministry of Finance,
according to the Law on indebtedness and public sector administration, all
the proposals in respect of future debt and withdrawal of funds of already
approved loans, and MF is according to the Law responsible to participate
in all activities of coordinating, contracting and formalizing any new debt
of the State and monitor dynamics of withdrawal of funds in respect of
already approved loans.
6. Responsible ministries are obliged to provide the list of projects planned
for the following three-year period to the Ministry of Finance including 30th
September of each current year, i.e. by the end of 3rd quarter of the year
preceding the planned three-year period. After this period, the Ministry of
Finance is not responsible to take any project proposals for consideration.
27