Amendments to Budget Increases Debt and Deficit

By , 15 Mar 2018, 11:38 AM Business
They tried to hide what is predicted with these changes: Government They tried to hide what is predicted with these changes: Government GOV.ME

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The Government said that the statements regarding the increase of state debt for this year caused by alternations in the budget are false, as well as that it is incorrect that there is now 440 million euro missing from the budget. However, the documents approved by the Government just two days earlier show that the Government’s statements are false.

The Government said that the statements regarding the increase of the state debt for this year caused by alternations in the budget are false, as well as that it is incorrect that now 440 million euro is missing from the budget. However, the documents approved by the Government, just two days earlier, show that the Government’s statements are false.

In the proposition of the Law for budget alternations in 2018, accepted by the Government on March 7, it clearly states: “In 2018 the Government, in order to provide missing funds for budget financing, the repayment of debt and reserves, can have a loan of 440.000.000 euro for the following requirements: budget financing and the repayment of debt and reserves in the total amount of up to 250.000.000 euro; and for the construction of the highway 'Bar-Boljare' in the amount up to 190.000.000 euro."

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An increased amount of bonds and altered ways of spending funds PHOTO: ARCHIVE

In the budget for 2018, approved in December, the following was stated: “In 2018 the Government, in order to provide missing funds for financing the budget, can create a loan of up to 296.000.000 euro for the following requirements: for repayment of debt and liabilities from the last period, for financing the capital budget in the amount up to 106.000.000 euro and for the construction of the highway 'Bar-Boljare' in the amount up to 190.000.000 euro”.

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144 million euro increase of debt PHOTO: ARCHIVE

Therefore, the missing funds in the budget totaled to 296 million two months ago, and now it is 440 million euro. These missing funds, as stated, are substantiated with new debts, which are now 144 million euro higher than before. 

By alternations of the budget, its primary deficit increased from 114 to 139 million, while the total debt – missing funds increased from 295 to 320 million.

The Government stated that the deficit increase was caused from providing 70 million euro for the purchase of the Electro company stocks from the Italian company A2A and that this is to be considered as an “increase of Montenegro state’s property and not a debt.” This transaction will affect the increase of debt in the same amount, because the money is taken as debt unless the Government plans to sell these stocks and use the money for reducing the deficit.

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With the alternation to the budget, the Government could get into debt with the emission of bonds of 500 million euro. This proposition of the budget states the following: “Regardless of the limitation stated in Article 1 of this act, in 2018 the Government can also get into debt for/or the repayment of debts and make reserves of up to 500.000.000 euro maximum, which can be provided by an arrangement with international financial institutions, and also the emission of bonds at the domestic and international market, credit loans and issuance of national records”.

The approved budget two months ago stated: “Regardless of the limitation stated in Article 1 of this act, in 2018 the Government can also get into debt for the refinance and repayment of debts up to 400.000.000 euro maximum, which can be provided by an arrangement with the World Bank (through credit arrangement – DPL or issuance of warranty by the World Bank – PBG), with international financial institutions, and also through the emission of bonds at the domestic and international market, credit loans and issuance of national records”.

Apart from the fact that the possible arrangement with the World Bank is being excluded and that the remaining option is only debt through bonds, the amount has also been increased from 400 to 500 million.

Earlier loans will be paid with this money, and if they succeed to accomplish the new emission of the bond at lower rates from the ones being closed, there are possibilities for savings. The state debt would not increase if the principal amount from earlier were covered with the overall amount of 500 million euro by the new money emission. However, there is a possibility to use the money from this new emission for “costs of re-financing/repaying and making reserves” which would result in an increase of state the debt for that same amount.

Text by Goran Kapor on March 13th, 2018 read more at Vijesti

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