Welcome to Montenegro, the land where the budget looks like a bottomless pit! In May this year, Montenegro’s state budget recorded a deficit of a whopping 35.8 million euros, far worse than the planned 30.5 million. And that’s not all — revenues have taken a serious nosedive! Instead of the planned 32.9 million euros from pension and disability insurance contributions, only 27.1 million was collected, a drop of 17.7%. VAT and excise revenues also fell short of expectations. How did this happen? Well, the pension insurance contributions were halved last October to just 10% of the employee’s gross salary, leaving the budget starved of crucial funds. Even though excise taxes on wine and tobacco products were increased, it wasn’t nearly enough to cover the losses.
To make matters worse, Montenegro had to repay an old debt of 49.3 million euros in May, putting even more strain on the budget. The total missing amount of money in May was a staggering 85.8 million euros! The gap was patched up with new borrowing of only 12.9 million and spending of deposits amounting to 71.8 million euros, but that’s just a temporary fix.
For the first five months of the year, revenues fell short by 22 million euros compared to the plan, with the biggest drop seen in pension insurance contributions — 13.7% less than last year. Although VAT collection was higher than last year, it wasn’t enough to save the day. Expenses were lower than planned, but the deficit still stands at 45 million euros, while last year in the same period the budget had a surplus of 32.6 million.
The government tried to cover the losses by cutting contributions and raising VAT, excise, and other taxes, but this only increased pressure on citizens and the economy. Will Montenegro manage to escape this financial whirlpool, or are bigger problems looming? Drop a comment if you think this is just the start of a financial meltdown or maybe you have your own recipe to save the budget!
