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SAI published Report on assessment of the application of the fiscal responsibility criteria in 2019

Podgorica, 20th October 2020 – Pursuant to the Law on the Budget and Fiscal responsibility criteria, the SAI has carried out assessment of the application of the fiscal responsibility criteria in 2019. Following the findings given in the Report on assessment of the application of the fiscal responsibility criteria in 2019, the competent Auditing Board has adopted the following:

-       Projections given in the Macroeconomic and fiscal policy guidelines for the period 2018-2021 and for the period 2019-2022 are not in line with the projections given in the Fiscal strategy for the period 2017-2020;

-       Spending ceilings planned in the Law on the budget of Montenegro for 2019 and Law on amendments to the Law on the Budget of Montenegro for 2019 are not in line with the spending ceilings defined in the Macroeconomic and fiscal policy guidelines for the period 2018-2021. Spending ceilings planned in the Law on the budget of Montenegro for 2020 and Law on amendments to the Law on the Budget of Montenegro for 2020 are not in line with the spending ceilings defined in the Macroeconomic and fiscal policy guidelines for the period 2019 – 2022.

-       Expenditures stated in the Proposal law on the final state budget account of Montenegro for 2019, reduced by exceptions of spending ceilings, amount to 1,866.19 million euros, that is for 17.91 million euros higher than the spending ceilings defined in the Law on amendments to the Law on the budget for 2019 and thus the defined spending ceiling is not adjusted.

-       Fiscal consolidation measures undertaken in the period 2017-2019, as well as planned expenditures and revenues in 2020 show that the deficit and public debt defined in the Fiscal strategy for the period 2017-2020 will not be accomplished in 2020.

Analyzing the static indicators as relation between the budget plan and execution in 2019, it is determined that three out of eight mandatory indicators are accomplished as follows: share of the budget deficit in GDP not exceeding 3% and it amounted to 2,65%; planned current revenues and donations are amounted to 1,825.52 million euros and they are higher than current expenditures and transfers, which are planned in the amount of 1,619.07 million euros; realized current revenues and donations are amounted to 1,878.75 million euros and higher than current expenditures and transfers which are realized in the amount of 1,625.80 million euros.

Static indicators related to 2019, and which are not accomplished are the following: primary budget cash deficit is planned in the amount of 92.31 million euros; primary budget cash deficit is accomplished in the amount of 23.45 million euros; planned share of budget deficit in GDP exceeding 3%, that is in the amount of 3,99%; planned share of public debt in GDP exceeding 60%, that is in the amount of 78,43%; realized share of public debt in GDP exceeding 60% and amounted to 76,54%.

Analyzing dynamic indicators in relation as relation between the budget plan and execution, it is determined that five out of six indicators are accomplished as follows: growth rate of the spending ceiling for the current budget and for the budget of the state funds (as relation between budget execution of 2018 and 2019), is less than realized growth rate of real GDP; growth rate of the spending ceiling for the capital budget (as relation between budget plan and execution of 2019),  is less than planned growth rate of nominal GDP; growth rate of the spending ceiling for the capital budget (as relation between the budget execution in 2018 and 2019), is less than the realized growth rate of the nominal GDP; growth rate of the spending ceiling for the budget reserve (as relation between the budget plan and execution in 2019), is less than planned growth rate of the nominal GDP; growth rate of the spending ceiling for the budget reserve (as relation between the budget execution in 2018 and 2019), is less than realized growth rate of the nominal GDP.

Dynamic indicator which is not accomplished relates to the growth rate of the spending ceiling of the current budget and the budget of the state funds (as relation between budget plan and execution of 2019), which is higher than planned growth rate of the real GDP.

Analysis of the criteria for the local self-government related to the deficit limit, by comparing revenues in the budget planning and execution process for 2019 shows that fifteen municipalities did not accomplish the criterion in the process of budget planning and eleven municipalities in the process of the budget execution.