BELGRADE, June 7 (Xinhua) -- Montenegro will need to undertake "difficult" fiscal adjustment efforts in order to decrease public debt, said International Monetary Fund (IMF) mission chief Martin Petri on Wednesday, according to an IMF press release.
Petri, who led the IMF mission for a visit to Podgorica from May 31 to June 7, said that if the Montenegrin government adopted the draft fiscal adjustments strategy published this week "it would put finances on a strong footing to achieve fiscal sustainability."
The fiscal adjustments strategy envisages measures such as increasing the standard VAT rate, excises on cigarettes, alcohol, sugary drinks, and coal, as well as a gradual reduction of wage and pension spending.
"The projected fiscal adjustment, if implemented, would put public debt on a sustainable path: after peaking in 2019 at 81 percent of GDP (gross domestic product) including guarantees...the debt ratio is projected to decline to 67 percent of GDP including guarantees by 2022," the IMF mission stated.
The IMF release also said that authorities had already taken some steps to limit wage costs by reducing the wages of senior officials and shrinking the public sector workforce, as well as limiting costly early retirement option plans but without reducing existing pensions.
"The policies described in the draft strategy would enable the authorities to achieve a primary surplus of about 4.5 percent of the GDP by 2020, a substantial improvement compared to a projected primary deficit of 4 percent of GDP in 2017."
The preliminary findings of the IMF expressed in the end-of-mission press release reveal that "the economic outlook for 2017 appears favorable with growth expected around 3.0 percent and low inflation."
"The current account deficit is projected to be around 20 percent of GDP, mainly because of imports for investment activity. Steady export growth --particularly in tourism and energy -- is expected to narrow the deficit in the future," the statement read.
