RepublIC OF MONTeNeGRO THe MINIsTRY OF FINANCe · 2009-11-30 · - Nikola Vukićević MA, Assistant to the Minister UNPRECEDENTED BUDGETARY SURPLUS AS A STEP FoRwARD REGARDING THE

RepublIC OF MONTeNeGROTHe MINIsTRY OF FINANCe

Republic of MontenegRo

MinistRy of finance bulletin iX

July - septeMbeR 2007

TAX ADMINISTRATION: www.poreskauprava.vlada.cg.yu

CUSTOM OFFICE: www.upravacarina.vlada.cg.yu

ANTI-CORRUPTION DIRECTORATE: www.antikorup.vlada.cg.yu

DIRECTORATE FOR ANTI-MONEY LONDERY:: www.gom.cg.yu/aspn

DIRECTORATE FOR REAL ESTATES: www.nekretnine.cg.yu

www.ministarstvo-finansija.vlada.cg.yu

Bulletin of the Ministry of Finance of Montenegro/July - September 2007

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TABLE OF CONTENTS

EDITORIAL- Igor Lukšić, PhD, Minister of Finance

LAW AMENDING AND SUPPLEMENTING BUDGET LAW OF THE REPUBLIC OF MONTENEGRO FOR 2007 - Nikola Vukićević MA, Assistant to the Minister

UNPRECEDENTED BUDGETARY SURPLUS AS A STEP FoRwARD REGARDING THE INFRASTRUCTURAL PRoJECTS: MEASURE TwICE BEFoRE YoU CUT - Dragana Crvenica, Journalist of the daily „Vijesti“ LAW AMENDING AND SUPPLEMENTING BUDGET LAW FOR 2007- CAPITAL BUDGET- Ljiljana Crnčević, Coordinator of the Department for Public Investment Planning

PROGRAMME BUDGETING IN 2008 BUDGET- Dean Brown, Senior Budget Advisor in Bearing Point, USAID

INCLUSION OF EXTRA BUDGETARY FUNDS INTO THE STATE TREASURY SYSTEM- Stanimirka Mijović, Independent Advisor

MEDIUM-TERM PROGRAMME OF WORKS ON SURVEY AND DESIGN OF THE REAL ESTATE CADASTRE AT THE TERRITORY OF THE REPUBLIC OF MONTENEGRO FOR PERIOD 2008 – 2013. - Real Estate Administration

ESTABLISHMENT OF THE REAL ESTATE CADASTRE ON REGIONS OF MUNICIPALITIES PODGORICA, BIJELO POLJE, ANDRIJEVICA AND BERANE - Real Estate Administration

PROJECT „250 HOUSING CREDITS“ - Dragan Darmanović, Senior Advisor

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Bulletin of the Ministry of FinanceJuly-September 2007

NUMBER:9

PUBLISHED:quartely

PUBLISHER:Republic of Montenegro

Ministry of Finance

FOR PUBLISHER:Igor Lukšić, PH.D.

EDITOR-IN-CHIEF:Ana Miljanić

ASSISTANT EDITOR-IN-CHIEF:Biljana Bataković

EDITORIAL BOARD:Koviljka Mihailović

Milorad KatnićKrsto Racković

TRANSLATOR:Jelena Čađenović

DESIGN:Adil Tuzović

CONTACT:PR Office of the

Ministry of Finance

TEL:+381 81 224 581

FAX:+381 81 224 450

E-MAIL: [email protected]

WEB:www.ministarstvo-finansija.vlada.cg.yu

ADRESS:Stanka Dragojevića br 2, Podgorica

PRINT:Grafotisak

COPYES:400

DRAFTING OF THE NATIONAL PROGRAMME OF INTEGRATION (NPI) AND ECONOMIC AND FISCAL PROGRAMME (EFP) - Bojana Bošković, Senior Advisor

LAW AMENDING AND SUPPLEMENTING THE LAW ON RESTITUTION OF EXPROPRIATED PROPERTY RIGHTS AND COMPENSATION - Maja Mitrović, Independent Advisor

PEMPAL - Nikola Vukićević MA, Assistant to the Minister - Richard Bartolomew, US Treasury Advisor

QUESTIONS FOR MINISTRY OF FINANCE BY MEDIA REPRESENTATIVES - MOST FREQUENT QUESTIONS OF MEDIA AND ANSWERS - PERIOD JULY - SEPTEMBER 2007 - Ana Miljanić, Spokesperson

REVIEW OF THE MOST IMPORTANT ACTIVITIES OF THE MINISTER OF FINANCE - PERIOD JULY - SEPTEMBER 2007 Ana Miljanić - SpokespersonBiljana Bataković - Assistant Spokesperson

INFO/REVIEW OF OTHER NEWS - PERIOD JULY - SEPTEMBER 2007 Ana Miljanić - Spokesperson, Biljana Bataković - Assistant Spokesperson

PUBLIC DEBT OF THE REPUBLIC OF MONTENEGRO - PERIOD JULY - SEPTEMBER 2007 - Nemanja Pavličić, Coordinator of the Department for Public Debt Management, Indebtedness Analysis, Cash Management and International Relations

REALISATION OF PUBLIC SPENDING AT THE LOCAL LEVEL - PERIOD JANUARY - JUNE 2007 - Vladislav Karadžić, Independent Advisor, - Gordana Radović, Independent Advisor

CONSOLIDATED PUBLIC SPENDING IN MONTENEGRO - PERIOD JANUARY - SEPTEMBER 2007, - Stanko Jeknić, Coordinator of Macroeconomic Analysis and International Cooperation Department, Vladislav Karadžić, Independent Advisor, Radovan Živković, Independent Advisor

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Republic of MontenegroMinistry of Finance

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Minister of FinanceIGOR LUKŠIĆ PhD

CONTACT:PHONE:+381 81 242-835FAX:+381 81 224 450E-MAIL:[email protected]:www.ministarstvo-finansija.vlada.cg.yu

EDITORIAL

Budgetary process has been total-ly intensified and their characteristics are the revision for 2007, preparations for making of the Budget for 2008, and changes of the systematic Law on Budget.

Drafting and adoption of the Law Amending and Supplementing Bu-dget Law for 2007, represents the introduction for the next fiscal year. Envisaged increase of salaries and strengthening of the capital expen-ditures will typical for last months of the current year. Unprecedented realisation of the budgetary revenues inspires strong optimism regarding the stability of public finances. High planned surplus of about 4% of GDP, strong growth of economy and fur-ther reduction of foreign debt are the signals of expansional economic cycle.

Expected key changes in the bud-getary policy in 2008, are reflected through further strengthening of the system of public finances with

their consolidation in the budgetary account which should be confirmed by the Parliament of Montenegro. Budget for 2008, will show, not only the Budget of the Republic but also the expenditures of all State funds. Furthermore, the estimation of the spending of local self-governments and regulatory bodies, and for the first time the commentary of the budget will include the balances of the most important public enterprises. All this is provided by the changes of the systematic Law on the Budget and the Budgetary Procedure. State accounts for the next year, unlike the current year, will be balanced with the mild surplus, which is caused by, first after many years, the significant growth of salaries in the wider public service. Besides, it will come to the increase of the capital budget through the opening of many new projects. Tax reforms will also be continued due to the application of new rates of con-tributions, which should additionally improve the competitiveness of the economy.

Dear readers,


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Expansion cycle has, however, also the other side about which we should be extra cautious. Fast growth of cred-its, high prices of real estates, but also the lower tax rates stimulate the investments and personal spending. The trend of the fast growth of the money supply is evident. Because of that, it is necessary to continue with the policy of structural reforms which in the long term can be the solution for slowing down of the economy, because the stronger regulation of the banking sector by the Central Bank after the adoption of the new Law on Banks is to be expected. Adoption of the new Law on Labour, elimination of some business barriers, further restructuring of the energy sector (regardless of the one-off influ-ence on the growth of prices), con-tinuation of privatisation and opening of new project with continuation of investments into infrastructure is the necessary policy, in order for the small Montenegrin economic system to be immune, easily adaptive and competi-tive. without the productivity growth and increase of the production of goods and services the growth of the living standard is not possible.

Dear readers,

This number of the Bulletin of the Ministry of Finance has enriched by the new segment-from journalists’ point of view. we will try to make our edition available to the public sphere in this way, in order to provide expres-sion of various opinions on fiscal and economic policy by contributing to the debate on themes which will be more and more dominant after the adoption of the new Montenegrin Constitution. I hope that the new space in bulletin will be filled with the attitudes of representatives of the non-government sector, refreshing in this way the kind of the public debate on public income and expenditures, or public goods used by the state by using the money of the tax payers.

Sincerely,Igor Lukšić, PhD


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Estimation of the receipts and expen-ditures of the Budget of the Republic of Montenegro for 2007 has been

done on the basis of expected growth of Gross domestic product (GDP) for 2007, i.e. planned increase of economic activity, data on trend of public spending in the period from 2001 to 2006 and current alterations regarding the set of Laws from the sphere of fiscal policy, above all, the Law on Per-sonal Income Tax and the Law on Value Added Tax; and on the basis of other regu-lations that govern functioning of Govern-mental bodies, extra-budgetary funds and other subjects of the State. The Budget Law also includes the capital budget separated from the current budget, where the most important capital projects from 2007, that will be financed from budget funds, have been systematically processed. Projections of the public revenues have been harmo-nized during the preparation of the Draft of the Budget Law, with assistance of repre-sentatives of International Monetary Fund and foreign experts for public finances, therefore the planned estimations have been tested in several ways.

After the last eight months of 2007, it is obvious that economic activity has exceeded the expectations. on the other hand, it generated the significantly higher collection of public incomes, compared to the plan. High growth rate has been noted in the areas of services – tourism, trade, real estate, financial intermediation, construction industry and traffic. The price of real estates has risen, as well as increase of the real estate business scope, especially at the coastal area and in Podgorica. For-eign net direct investments of the capital have increased as well as the employment rates and average income in the Republic. All of this affected increase of the funds at the Treasury above the planned level. How-ever, it is very important to indicate that activity of the authorities of the Republic has increased, especially of the Tax Admin-istration and Customs, which resulted in decrease of the grey economy, suppression of cigarettes illegal market and additionally

conditioned better collection of value add-ed tax, tax on international trade, customs transactions and excise tax.

Higher collection of fiscal duties than planned, was one of the reasons for adop-tion of the Draft Law Amending and Sup-plementing Budget Law for 2007, because the conditions were met for accelerated realization of certain Government econom-ic policy goals for 2007. This, most of all, refers to the increase of average income of the employees in public administration and further decrease of the public debt of the Republic in order to reach the level of 30% of GDP until 2010. Also, the increased pace of activities regarding the most vul-nerable ranks of society has been done, through subventions for electricity bills and other social benefits as well the increase of the Capital Budget are amongst priorities. The growth of the minimal labour cost in December 2006 caused a linear increase of the average salaries for all employed per-sons in the Republic, which did not reflect on the first Budget Law for 2007, since it was already one step before adoption by the Parliament. Surplus profit earned through higher receipts than expenses has enabled further increase of the earnings (cumulative 30%) of the persons employed

in Health, Education and Culture sector. while for the others, which are financed from the Republic Budget, this increase will start its realization from 1st January 2008.

By Amendments and Supplements of the Budget Law for 2007, total planned receipts are 749,09 mil € , which is 132,23 mil € higher amount than the planned one from the Budget Law for 2007.

Taxes are being planned to the amount of 653,61 mill €, and are 124,91 mill€ high-er than planned. Personal income tax is planned to the amount of 73,87 mill € and it is increased for 7,75 mill €, corporate tax is 40,29 mil € and it is increased for 25,26 mill €, property tax, i.e. capital transfer tax is 14,17 mill € and it is increased for 8,24 mill €, value added tax is 369,71 mill € and it is increased for 72,57 mill €, excises 85,95 mill € and it is increased for 6,59 mill €, tax on international trade and customs is 63,88 mill € and it is increased for 3,21 mill €, while other taxes of the Republic are planned to the amount of 5,75 mill € and they are 1,27 mill € higher when compared to the amount planned by the Budget Law for 2007.

Duties are being planned to the amount of 17,52 mill € and this amount is lower for 2,61 mill €, when compared to the planned amount. Stamp duties are 9,99 mill € and they are reduced for 4,26 mill €, the reason for reduction is postpone-ment of the personal Ids replacement in 2007, and the income based on this was stipulated by the Budget Law for 2007. The planned amount of court stamp duties is 7,09 mill € and they are increased for 1,62 mill €, residence taxes are 0,43 mill € and they are slightly higher when compared to the planned amount.

Increase of compensations is planed to the amount of 21,68 mill € and they are 3,05 mill € higher than planned amount. Com-pensations for usage of goods of common interest are 4,33 mill € and it is increased for 2,98 mill €, due to the significantly higher collection of compensations for utilities in the first eight months in 2007, compensa-tions for usage of natural resources amount

Law Amending and Supplementing

Budget Law for 2007


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2,75 mill € and are 0,48 mill € lower, eco-logical compensations are 2,35 mill € and are 0,24 mill € higher, compensations for organising games of chance are 4,67 mill € which is 0,65 mill € higher, road fees are 5,40 mill € and they are reduced for 0,46 mill €. other compensations are planned to the amount of 2,18 mill € they are increased for 0,11 mill €, compared to the amount planned in Budget Law for 2007.

other revenues, according to the revi-sion, are planned to the amount of 34,06 mill € and they are 18,03 mill € higher when compared to the amount planned in Budget Law for 2007. Penalties and expro-priated property benefits are planned to the amount of 9.98 mill € and they are 1,96 mill € higher, revenues made by authorities and their activity are 3.57 mill € and they are reduced for 0.11 mill €, other revenues are 6.55 mill € and they are increased for 2.24 mill €; yields on capital are planned to be to the amount of 13,96 mill € (the sale of third license for third mobile provider). Yields on capital were not planned by the Budget Law.

Loans and credits from foreign sources are planned to be 4,87 mill €, donations amount to 0,6 mill €, project loans are 4 mill € and revenues from privatisation amount to 8 mill €.

Budget surplus is planned to the amount of 90,03 mill €. The surplus result-ing from the difference between current incomes and the expenditures will be used for financing debt repayment, servicing of debt from previous years (including old foreign currency savings) and Capital Budget. Methodologically, due to the sug-gestions of International Monetary Fond and in accordance with statistics of the public sector (Government Finance Statis-tics), repayment of budget call in arrears during 2007 has been presented as debt repayment; i.e. as liability that is repaid after affirmation of budget surplus or deficit, which was specially notified in each report of the Ministry of Finance. In the case of considering those liabilities as current expenditure, the surplus would be reduced for the amount of those liabilities.

Total public revenues for 2007 are esti-mated to the amount of 1.122,63 mill€, that makes 52,09 % of GDP for 2007 (2.155,00 mill €) . Taxes have the biggest share in the structure of public revenues – 719,73 mill € or 33,4 % of GDP, then contributions – 257,27 mill € or 11,94 % of GDP. Taxes amount to 64 % of total public revenues, contributions amount to 23 % while other revenues make 13 % of total public rev-enues.

Estimated public spending in 2007 amounts 1.056,85 mill €, or 49,04 % of

GDP. with the second level of consolida-tion we come to the total level of public spending, 47,12 % of GDP. Estimated cur-rent public spending (consolidated public spending, reduced for total capital expen-ditures – Capital Budget of the Republic of Montenegro, capital expenditures in current budget and capital expenditures of funds and municipalities) in 2007 amounts 906,55 mill €, which is 42,07 % of GDP for 2007.

Estimated surplus of the revenues over expenditures in 2007 is 65,78 mill€, which makes 3,05 % of the estimated GDP for 2007.

Surplus of the funds earmarked for the current budget amounts 131,2 mill €.

Funds for gross earnings of the employ-ees have been increased for 20,2 mill €, as a result of the Draft Law on Budget. As it was mentioned before, the increase resulted from the raise of the minimal wage, that amounted to 52.00€ in the first quarter, in the second quarter to 53.00€, and in the third and forth quarter it amounts to 55.00€. In addition, the increase resulted from application of following regulations: The Law on Earnings and other Incomes of the Appointees of Juridical, Court and Constitutional Positions, that provides for the increase of earnings from Septem-ber; Amendments and Supplements of the Branch Collective Contract for health and social sector, which provides for the increase of the employees’ earnings for 30 %, from September; Amendments and Supplements of the Branch Collective Contract for the education sector, which provides for the increase of the employ-ees’ earnings for 20 %, from october and Amendments and Supplements of the Branch Collective Contract for the culture sector, which provides for the increase of

the employees’ earnings for 20 %, from october.

Costs for material and services has increased for 7,0 mill€. Significant increase, amounting to 2,9 mill€ relates to con-tracted services (vocational training of the employees, production and maintenance of software, media and promoting activities etc.). Expenditure for office supply, spare parts and small inventory has increased for 1,9 mill€. The remaining part of the funds refers to the increase of the expenditure for the electricity bills to 1,2 mill€, for business trips amounting to 0,6 mill € and increase of the expenditure resulting from payment of the phone bills amounting to 0,2 mill €.

Increase of the funds for current main-tenance amounts to 1,0 mill €. Funds for the current maintenance of the buildings are increased for 0.9 mill € and the funds for the current maintenance of the equipment are increased for 0,09 mill €.

Subsidy funds are increased for 5,0 mill € and they refer to the subsidies to the Steel plant-Niksic for the cost of electric power. The commitment results from the Sales Contract on sale of 66,7% of all stocks of the joint stock company, Steel plant-Niksic. This Contract provides (Annex No.9) that Government will participate in the payment of certain quantities of electric power during the durance of investment period of time, from 2007 until 2011 and the buyer will invest 117 mill € into the Steel plant, during the same period.

Transfers for the social care are increased for 3,5 mill €. This increase result-ed from the extension of the rights and increased number of the beneficiaries of the child benefits, veterans and disabled persons’ benefits, family benefits, maternity leave, professional care and support to the funds needed for canteen meals in kinder gardens.

Transfers to the institutions, individ-uals, NGo and governmental sector are increased for 5,3 mill €. This increase refers to the increase of funds for 1,9 mill €, need-ed for broadcasting signal of the National TV of the Republic of Montenegro on the territory of Montenegro; to the increase of funds for 1,4 mill €, needed for the reali-zation of sport programs; to the increase of funds for 0,8 mill € for overcoming the problems regarding the collection of radio and TV subscription as well as to the increase of funds for 0,5 mill €, needed for the increase of earnings for the employed at the University of Montenegro.

Capital expenditures are increased for 9,1 mill €. Expenses on construction objects are increased for 3,5 mil.€; costs for investment maintenance are increased for 2,4 mill €; costs for the equipment are


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increased for 1,7 mil.€ and the costs for local infrastructure are increased for 1,5 mil.€.

The funds for repayment of debts are significantly increased, and they amount to 68,9 mill€. For repayment of bonds and credits of non-residents, the funds are increased for 47,8 mill€; for repayment of liabilities from previous years, the funds are increased for 15,1 mill€ and for the repay-ment of bonds and credits of residents, the funds are increased for 5,9 mill€. we are talking about premature debt repayment to the world Bank, that amounts 39 mill€; regular repayment of obligations resulting from old foreign currency savings; regular repayment of foreign credits; payment of initial quota for membership in Interna-tional Monetary Fund and world Bank; repayment of the budget call in arrears and repayment of the obligations based on effective court decisions, which represents a significant amount in 2007.

The funds of the current budgetary reserve are increased for 4,0 mill €. Those funds will be used for contingent expenses, until the end of 2007.

Credit under oECD conditions was signed with the Government of the Repub-lic of Hungary in 2005. This credit implies favourable interest rate, under the market level and long repayment period. The funds are used for construction of the educational institutions in Podgorica, Gym-nasium building, Economic high school and building of Medical high school. Total amount of the credit is 15 mill € and so far in 2007, 4,6 mill € has been withdrawn. Specific quality of all credits under oECD arrangements is that funds are directly transmitted to the suppliers, i.e. contrac-tors; therefore they cannot be shown in the legal part of the budget.

During 2007, including August 31st, credit arrangements have been signed with affiliation of the world Bank, Interna-tional Development Association (IDA), for the Energy Sector Development Project, that amounts to 6,75 mil. €; for Sustainable Tourism Project; for regional water supply, that amounts to 7,5 mil. €, (original cur-rency of the loan is special drawing rights – SDR). Credit arrangement was also signed with German bank (Kfw), for the Energy Sector Development Project, that amounts 5,4 mill EUR. Until the end of 2007, the sign-ing of third phase of the project Regional water Supply System and Liquid waste with Kfw bank is anticipated, and it will amount to 4,5 mill €, Project of the Recon-struction of the Railway Infrastructure with European Bank for Reconstruction and Development (EBRD), that amounts to 6,0 mil. € is also anticipated until the end of

2007. In all credit arrangements, except the contract with IDA and European Invest-ment Bank (EIB), the Government of the Republic of Montenegro (Government) will act as a guarantee to the end-users of credit funds. In arrangements with IDA, a special contract will define the relation between the Government and the end-users of the funds, Electric Power Industry of Montenegro, Public Enterprise Region-al water Supply System for Montenegrin coastal area and Municipal Assembly of Ulcinj. In addition, the resumed signing of the contracts credited by EIB, that were first signed during the existence of the state Serbia and Montenegro and which refer to the projects in Montenegro, is anticipated. Specifically, there are 13 mill € that have not been drawn; 4 mill € for the Recovery of Road Network Project, 1 mill € for the Reconstruction of the Airport Project, 5 mill € for the Regulation of Liquid waste and Improvement of Energy Sector Project.

out of these signed credit arrange-ments in 2007, the funds intended for the Budget of the Republic and that will be withdrawn during 2007 are the funds for the Recovery of Road Network EIB Project and they amount to 4 mil. €.

Based on realized public revenues and expenditure in 2007 and taking into con-sideration the entire economic situation in Montenegro, the following conclusions can be drown:

According to the evaluation of Ministry of Finance, the growth of tax revenues as it was in 2006 and during the first eight months of 2007, is not sustainable in a long term period. After the investment boom that started in the second half of 2005 and which has lasted in 2006 and the first eight months of 2007, with trend of con-tinuation during the most part of 2008, it is realistic to expect the stabilisation of eco-nomic activities when the certain reduc-tion of certain tax revenues is expected. This, primarily, refers to value added tax, which makes more than half of total cur-rent revenues of the budget; and the cus-toms revenues, that amount to nearly 9% of the current revenues. Therefore, more than 60% current budget revenues directly depend on dynamic of economic activities, i.e. on investment boom in Montenegro. on the other hand, the difference between the receipts and current revenues, results from one-off property sale revenues, loans and credits. All this confirms the fact that any long term commitments in medium or long term, made on the basis of accumu-lated revenues in 2007, would cause the deficit of the Budget of the Republic in a near future, with all negative side-effects of this kind of situation.

Ministry of Finance considers that, first of all, surplus should be used for strength-ening of reserve funds, i.e. State deposits for the future period of stabilization or reduction of tax revenues. Those reserve funds will be used for meeting the current expenses in the following years instead of making external debts accumulation in order to finance public expenditures. In addition, it may be used as a collateral for construction of capital infrastructure projects in Montenegro, whether the work will be done independently or with strate-gic partners. Secondly, surplus should be used for debt repayment. Thus, the partici-pation of public debt in GDP is reduced but the credit expansion of commercial banks is also sterilized, that, together with deficit of the balance payments represents the so called «dangerous» side of the rapid eco-nomic development. The third possibility is to use deposits as a base for the further reduction of direct taxes, in order to make the business environment as stimulating as can be for further economic activities and continuation of foreign investments.

If the existing surplus continues to gen-erate additional current public expenditure in the following years, inflation can start and this would undermine the balance of macroeconomic aggregates – supply and demand of goods, services, currency. Therefore, one of the priorities of the Min-istry of Finance and the Government of Montenegro is further maintenance of the achieved macroeconomic stability in Mon-tenegro. Increase of the earnings, realized or planned, that amounts to 30%, has used up further growth until 2010, any more significant amount at least, except for the harmonization with the rise of inflation rate. Public expenditure will be probably burdened with additional expenses, such as necessary growth of the diplomatic-consular representative bodies network; capacity building of official administration towards becoming a member of Europe-an Union; strategic infrastructure projects, above all, the construction of the high-way Bar-Boljare, but also others, not less important projects related to water supply, disposal of liquid waste, construction of up-to-date waste dump; construction and maintenance of the national road network. Great needs also point out the necessary caution in planning budget funds in the following years, as well as in determining the sustainable investment and in spend-ing the funds.

Nikola Vukićević MAASSISTENT TO ThE MINISTER


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During hot August days, beside dis-cussions among different parties on Constitution (probably the only

remaining issue that gives room for debates in media, within the range of well rehearsed national rhetoric, there was one unexpect-edly good news – Republic budget, instead of deficit, in seven months has accumulated 117 million euros of the surplus.

In the light of the fact that there has not been any significant sale of the state property, and that budget revenues are sig-nificantly higher than the one from last year, this data seems as even bigger success.

Almost 98 million euros more than planned amount of taxes was collected. Naturally, VAT had the greatest impact on that result and the biggest surprise for the planners were corporate tax and property tax, since the amount collected on these taxes was three times bigger than it had been estimated.

Revived hopes that the Republic will be generous to the poor and increase the social care, came to an abrupt end since it turned out that the Republic will become even more tight-fisted when it comes to this issue.

The Draft Law Amending and Supplementing the Budget Law indicates some softening of the initial attitude, since it suggests the increase of expenses for around 57 million euros (the biggest part refers to the earnings increase), while less than one sixth of the entire amount is intended for the social care. Social care is mostly increased due to the including of the previously announced programme of the subvention of the part of electricity bills for poor households. This amount of Budget surplus was not enough to prevent the step backwards of the social policy. Therefore, beside the decrease of the number of households that will receive some help for paying the electricity bills and ‘cutting’ the bills from 20 to 11,2 euros a month, it was decided to reduce the scholarships for the children who were in the ‘train of death’, in January 2006. In addition, it was decided that the former owners of expropriated property during the socialism, will receive less reimbursement than it was originally planned.

A critic on duty would notice that at the same time, the Government decided to approve five million euros of subvention for electricity bills to the privatized Still plant and to help Afghanistan, the country that produces around 90% of the entire world opium production, by sending it 1.500 auto-matic rifles, 100 machine-guns and 250.000 bullets.

An optimist on duty would neglect the above mentioned unpopular moves, because restrain from expenses increase and repayment of foreign debts, give room to the Republic to solve a big part of social problems in a long term period.

Beside this, all economists agree that the surplus indicates the moment of invest-ment boom and mass property sale and that this moment should be wisely used, since it will not last forever.

The fact that the Republic did not give in under the pressure of unplanned income like many Montenegrins who sold their inherited land to foreigners (although the salaries in public salaries have been increased), encourages the hope that the same precaution, based on the prin-ciple ‘measure twice, before you cut’, will be applied for the choice of infrastruc-ture projects that would solve outstanding problems in tourism and other branches connected to it. Therefore, we are eagerly anticipating a plan for possible investments and its profit investment.

Creating high quality infrastructure base (roads, water supply, electricity...), with investment increase in science, education and improvement of health services would be a big step forward a steady economic development of a legal country that sup-ports business and it would stop to an end the migration of the citizens to the south of the Republic, that has lasted for decades.

In this scenario, that does not have to be utopian, even the people from the mar-gin (who live in a larger half of Montenegro, if we take in consideration the size of territo-ry) would bear more easily ‘painful transition cuts’, because they would have something to hope for.

Dragana CrvenicaJournalist of the daily “Vijesti”

From the Journalist’s point of view:

UNPRECCEDENTED BUDGETARY SURPLAS AS A STEP FoRwARD REGARDING THE INFRASTRUCTURAL PRoJECTS

Measure Twice Before You CutThe fact that the Republic did not give in under the pressure of unplanned income like many Montenegrins who sold the inherited land to foreigners (although it increased the salaries in the public sector), encourages the hope that the same precaution will be applied and comparative analysis would be used for the choice of infrastructure projects that would solve outstanding problems in tourism and other branches connected to it.


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CAPITAL BUDGET

Funds for Capital Budget were planned for 2007, to the total amount of 33,91 mill. EUR by the Budget Law of the Republic of Montenegro. Draft Law Amending and Supplementing Budget Law of the Republic of Montenegro for 2007 increases the amount of funds for the Capital Budget to the amount of 1,00 mil €.

Summary table of the Capital Budget

Economic classification Description Plan 2007 Difference Revision

4 Expenditures 33,911,032.10 1,000,000.00 34,911,032,10

41 Current expenditures 1,376,964.60 572,000.00 1,948,964,60

44 Capital expenditures 32,534,067.50 428,000.00 32,962,067.50

For Directorate for Public works funds were planned to the amount of 15,91 mil € for capital projects in the Capital Budget for 2007. Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007 reduced the funds to the amount of 0,50 mil € and redirected them to the Directorate for Traffic for the Project Construction of the highway from Smokovac to Veruša.

Directorate for Public Works

Functional classification

Economic classification

Description Plan 2007 Difference Revision

290 Directorate for Public works 15,911,032.10 -500,000.00 15,411,032.10

Musical centre – Reconstruction and Adaptation of the Army Home facility in Podgorica




721Musical Centre – Reconstruction and Renovation of the Army Home facility in Podgorica

3,184,200.00 -2,500,000.00 684,200.00

7211 Preparation phase 280,000.00 0.00 280,000.00

7212 Construction phase 2,904,200.00 -2,500,000.00 404,200.00

4 Expenditures 2,904,200.00 -2,500,000.00 404,200.00

41 Current expenditures 24,200.00 0.00 24,200.00

413 Costs for material and services 24,200.00 0.00 24,200.00

o820 4139 Contracted services 24,200.00 0.00 24,200.00

44 Capital expenditures 2,880,000.00 380,000.00

441 Capital expenditures 2,880,000.00 -2,500,000.00 380,000.00

o820 4413 Expenditures for buildings 2,380,000.00 -2,000,000.00 380,000.00

o820 4415 Expenditures for equipment 500,000.00 -500,000.00 0.00

For the capital project Musical Centre - Reconstruction and Renovation of the Army Home facility in Podgorica funds were planned in the Capital Budget for 2007, to the amount of 3,23 mill. EUR for preparation phase 0,28 mill EUR and construction phase 2,95 mill. EUR.

Due to unsolved property relations, the deadline for draft of the project documentation was prolonged, after what the Directorate for Public work will announce a public competition for most favourable work bidder. Start of construction of this object is planned for the end of 2007, so the planned funds in the Construction phase will not be realised in total in 2007.

Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007, reduced the funds in the Construction Phase-

Law Amending and Supplementing Budget Law for 2007 - Capital Budget


13

expenditures for equipment to the amount of 0,50 mill. EUR and redirected them to the Directorate for Traffic for capital project Construction of the Highway from Smokovac to Veruša, funds in the Construction were also reduced- expenditures for the construction objects to the amount of 2,00 mill € and redirected to the following capital projects:

Head office of the Custom house Kotor– Kotor



description Plan 2007 Difference Revised

709Head office of the Custom house Kotor-Kotor

332,000.00 100,000.00 432,000.00

7092 Construction phase 332,000.00 100,000.00 432,000.00

4 Costs 332,000.00 100,000.00 432,000.00

41 Current costs 8,700.00 0.00 8,700.00


o112 4131 Costs for material and services 500.00 0.00 500.00

o112 4134 Costs for energy 1,000.00 0.00 1,000.00

o112 4135 Costs for phone services 200.00 0.00 200.00


44 Capital expenditures 332,000.00 0.00 423,300.00

441 Capital expenditures 332,000.00 0.00 423,300.00

o112 4413 Expenditures for buildings 223,300.00 100,000.00 323,300.00

o112 4413 Expenditures for equipment 100,000.00 0.00 100,000.00

For capital project Head office of the Custom House Kotor, funds are planned in the capital budget for 2007 for the Construction phase to the amount of 0,33 mill. EUR.

Directorate for Public works has signed an Agreement for execution of works on the construction of the object with equipping (without the construction of infrastructural connections and works on arrangement of the terrain) to the total amount of 0, 37 mill €.

Taking into account that planned funds for this period are not sufficient, the Law Amending and Supplementing the Budget Law for 2007, increases the funds in the Construction phase- expenditures for construction objects to the amount of 0,10 mill € (0,04 mill € for contracted works and the rest from 0,06 mill € for additional works, which must be executed on the replacement of the subsoil, at the ground construction, at the construction of the retaining wall and draining next to the object, all due to the very bad quality of the terrain planned for construction of the object ).

Prison for Minors, Prison for Women and Emergency Prison for Foreigners




711 Prison for Minors, Prison for women and Emergency Prison for Foreigners

500,000.00 350,000.00 850,000.00

7111 Preparation phase16,260.00

0.00 16,260.00


4 Costs 483,740.00 350,000.00 833,740.00

41 Current costs 5,110.00 0.00 5,110.00


o340 4131 Costs for material 50.00 0.00 50.00



44 Capital expenditures 478,630.00 350,000.00 828,630.00


o340 4413 Expenditures for buildnings 478,630.00 350,000.00 828,630.00 For capital project Prison for Minors, Prison for women and Emergency Prison for Foreigners funds were planned in the Capital Budget for

2007, to the amount of 0,50 mil. € and projected funds in 2008, to the amount of 0,48 mill €. Directorate for Public works has signed the Contract for Execution of works on Construction of this object (without the infrastructural

connections and works on arrangement of the terrain) to the amount of 0,70 mill €.Considering the fact that the funds needed for the realisation of this project planned in 2007, are not sufficient, the Law Amending and


1�

Supplementing the Budget Law of the Republic of Montenegro for 2007, increases the funds in the Construction phase - expenditures for construction objects to the amount of 0,35 mill € (for additional works and works on infrastructural connections and works on arrangement of the terrain). In accordance with that, funds for realisation of the signed contract are totally planed in 2007.

Department for Prison Sentencing of up to 6 Months and Sentences to Prison Pronounced on the Offence Procedure




712Department for Prison Sentencing of up to 6 Months and Sentences to Prison Pronounced in the offence Procedure

500,000.00 350,000.00 850,000.00

7121 Preparation phase 18,260.00 0.00 18,260.00


4 Costs 481,740.00 350,000.00 831,740.00

41 Current costs 6,110.00 0.00 6,110.00


o340 4131 Costs for material 50.00 0.00 50.00





o340 4413 Expenditures for buildings 475,630.00 350,000.00 825,630.00

For Department for Prison Sentencing up to 6 Months and Sentences to Prison Pronounced in the offence Procedure funds were planned in the capital budget for 2007, to the amount of 0,50 mill. EUR and projected funds in 2008, to the amount of 0,48 mill €.

Directorate for Public works has signed the contract for execution of works on construction of this object (without infrastructural connections) to the amount of 0,70 mill €.

Considering the fact that the funds needed for the realisation of this project planned in 2007, are not sufficient, the Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007, increases the funds in the Construction phase - expenditures for construction objects to the amount of 0,35 mill € (for additional works and works on infrastructural connections and works on arrangement of the terrain). In accordance with that, funds for realisation of the signed contract are totally planed in 2007.

Reconstruction of the administrative building « Vukman Kruščić « - Mojkovac




722Reconstruction of the administrative building “ Vukman Kruščić” Mojkovac

0.00 651,800.00 651,800.00

7222 Construction phase 0.00 651,800.00 651,800.00

4 Costs 0.00 651,800.00 651,800.00

44 Capital expenditures 0.00 651,800.00 651,800.00


1091 4413 Expenditures for buildings 0.00 651,800.00 651,800.00

Realisation of the Project Reconstruction of the Administrative building « Vukman Kruščić « - Mojkovac was planned with the Programme of Public works for 2007, by the principle of a credit arrangement.

However, Ministry of Finance has supported the suggestion of the Directorate for Public works to have the remediation and adaptation of the former administrative building of the CIS « Vukman Kruščić « and execution of works on construction of the temporary structure for accommodation of socially unprovided-for persons financed from the budget 2007, instead of from credit borrowing, which would cause the nominal saving in costs of around 0,13 mill €.

Contracted value of works on reconstruction of this project amounts 0,63 mill €, what with operative reserve of 0,02 mill € (2,5% of investment), amounts in total 0,65 mill €.

with the Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007, in the Construction phase – Expenditures for construction objects, the funds are planned to the amount of 0,65 mill €.


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Reconstruction of the school centre « Tvrtko Bijelić » - NikšićFunctional classification

Economic classification Description Plan

2007 Difference Revision

723 Reconstruction of the school centre “Tvrtko Bijelić” Nikšić 0.00 548,200.00 548,200.00

7231 Preparation phase 0.00 10,000.00 10,000.00

4 Costs 0.00 10,000.00 10,000.00 41 Current costs 0.00 10,000.00 10,000.00 413 Costs for material and services 0.00 10,000.00 10,000.00O922 4139 Contracted services 0.00 10,000.00 10,000.00


4 Costs 0.00 12,000.00 12,000.00 41 Current costs 0.00 12,000.00 12,000.00 413 Costs for material and services 0.00 12,000.00 12,000.00O922 4139 Contracted services 0.00 12,000.00 12,000.00 44 Capital expenditures 0.00 526,200.00 526,200.00 441 Capital expenditures 0.00 526,200.00 526,200.00O922 4413 Expenditures for buildings 0.00 526,200.00 526,200.00

Realisation of the Project Reconstruction of the School Centre « Tvrtko Bijelić » - Nikšić was planned by the Programme of Public works for 2007, by the principle of the credit arrangement. Also for this Project, the Ministry of Finance has supported the suggestion of the Directorate for Public works, to have the funds needed for realisation of the object financed from the budgetary funds for 2007 instead from the credit arrangement, and the remaining funds for finishing of the object in 2008.

Directorate for Public works has by now drafted the project documentation and prepared the documents for announcement of a public competition for the best bidder. Contracted value of works on reconstruction of this object amounts cca 1,60 mill €, and estimated deadline of realisation (considering the fact that it is an object of 3.500 m2) is 8 months, meaning that the realisation of this project would continue in 2008.

with the Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007, funds were planned in the Preparation phase – Contracted services to the amount of 0,01 mill €, in the Construction phase- Contracted services funds to the amount of 0,01 mill € and in the Construction phase- Expenditures for buildings to the amount of 0,53 mil €.

For the Directorate for Traffic, funds were planned for capital projects in the Capital Budget for 2007 to the amount of 18,00 mil €. with the Law Amending and Supplementing the Budget Law for 2007 the funds were increased to the amount of 1,50 mil €.

Directorate for TrafficFunctional classification



660 Directorate for Traffic 18,000,000.00 1,500,000.00 19,500,000.00

Road Risan – Grahovo – ŽabljakFunctional classification



715 Put Risan-Grahovo - Žabljak 7,000,000.00 3,000,000.00 10,000,000.00

7152 Construction costs 7,000,000.00 3,000,000.00 10,000,000.00

4 Costs 3,600.00 3,000,000.00 3,600.00

41 Current costs 3,600.00 0.00 3,600.00


0451 4131 Costs for material 300.00 0.00 300.00

0451 4132 Costs for business trips 720.00 0.00 720.00

0451 4133 Costs for representation 600.00 0.00 600.00

0451 4134 Costs for business trips 480.00 0.00 480.00

0451 4135 Costs for phone services 600.00 0.00 600.00

0451 4139 Contracted services 900.00 0.00 900.00

44 Capital expenditures 6,996,400.00 3,000,000.00 9,996,400.00

441 Capital expenditures 6,996,400.00 3,000,000.00 9,996,400.00

0451 4411Expenditures for infrastructure of common interest

6,996,400.00 3,000,000.00 9,996,400.00


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For capital project Road Put Risan – Grahovo – Žabljak funds were planed in the Capital Budget for 2007, to the amount of 7,00 mil €.These funds were planned for construction of the part of the road from Risan to Knež Laz. During construction, expropriation of the land at

the section was performed to the amount of 1,30 mill €, so that the part of planned funds was spent for this purpose. Also, for the same project the contract was signed and the works started on driving of the tunnel « Ivice « whose value is around 1,70 mill €.

In order to continue with the construction of the Road Risan – Grahovo – Žabljak, with the Law Amending and Supplementing the Budget Law of the Republic for 2007, the funds are increased in the Construction phase- Expenditures for infrastructure of common interest to the amount of 1,00 mill €, and also for the amount of 2,00 mil €, which is redirected from the capital project Mišići- Buljarica preko prevoja Kufin.

Mišići – Buljarica over the saddle Kufin




718Mišići - Buljarica over the saddle Kufin

3,000,000.00 -2,000,000.00 1,000,000.00

7182 Construction phase 3,000,000.00 -2,000,000.00 1,000,000.00

4 Costs 3,000,000.00 -2,000,000.00 1,000,000.00

44 Capital expenditures 3,000,000.00 -2,000,000.00 1,000,000.00

441 Capital expenditures 3,000,000.00 -2,000,000.00 1,000,000.00

o451 4411Costs for infrastructure of common interest

3,000,000.00 -2,000,000.00 1,000,000.00

For capital project Mišići – Buljarica over the saddle Kufin funds were planned in the Capital Budget for 2007, from credits of the European Investment Bank to the amount of 3,00 mill €. with Law Amending and Supplementing the Budget Law of the Republic of Montenegro for 2007, funds are reduced in the Construction phase- costs for infrastructure of common interest to the amount of 2,00 mill € and redirected at the capital project Road Risan – Grahovo- Žabljak.

Construction of the highway from Smokovac to Veruša




724Construction of the highway from Smokovac to Veruša

0.00 500,000.00 500,000.00


4 Costs 0.00 500,000.00 500,000.00



o451 4411Costs for infrastructure of common interest

0.00 500,000.00 500,000.00

with the Law Amending and Supplementign the Budget Law of the Republic of Montenegro for 2007, funds were redirected from the Directorate for Public works from the capital project Musical centre- Reconstruction and adaptation of the Army Home facility in Podgorica, to the Project Construction of the Highway from Smokovac to Veruša in the Preparation phase for- Contracted services to the amount of 0, 50 mill €.

Ljiljana Crnčević Coordinator of the

Department of the Public Investments Planning


1�

Program Budgeting is a modern strategic form of budget-ing operating in over 72 percent of countries worldwide. Implementing Program Budgeting involves developing

program structures for Budget Users that link to the Government’s strategic policy objectives. It also involves the use of output and outcome performance indicators focused on program results that improve transparency and accountability in the usage of public resources.

The Program Budgeting is one of the most significant tools for a good public governance as it provides much clearer picture on strategic objectives, plans and programs of any given Government and thus provides effective and efficient use of funds and reduces possibilities for abuse and misuse of funds and their allocation.

The introduction of Program Budgeting requires a change in the operational culture of most Budget Users from one of adminis-tration and control to one of managing performance that is results orientated in terms of program impacts. Program Budgeting is also a more costly and far more complex form of budgeting than the traditional form of Line Item Budgeting that still operates in Montenegro where funding is allocated in the Budget to cover the cost of inputs for delivering government services, such as expen-ditures for salaries, contributions, business trips, postage services, phones services etc.

Montenegro has decided to adopt such budget concept and therefore commenced Piloting Program Budgeting in the 2004 Budget with two Budget Users, which has increased annually to a total of 15 in the 2007 Budget (15% of the total number of Budget Users).

In January 2007 the Ministry of Finance decided to undertake an evaluation to analyze the results achieved so far from Program Budgeting and to utilize the experiences of other countries to pre-pare a future implementation strategy and to prepare a detailed County Action Plan to capture the specific outcomes expected of this reform. This article will outline the progress made in imple-menting the reforms of the Country Action Plan in 2007.

The USAID/BearingPoint project has provided significant tech-nical assistance to the Ministry of Finance lead review of the effec-tiveness of Program Budgeting and the drafting of the report. It was an excellent result for the Ministry of Finance that the Govern-ment of Montenegro approved the review’s recommendation to continue on the path to fully implementing Program Budgeting through the adoption of a Country Action Plan that is based on a staggered implementation approach over the next three years. The Action Plan contains a comprehensive set of tasks, timelines and responsibilities for the Ministry of Finance, Budget Users and State Audit Institute.

one of the key recommendations of the review was to rectify the current deficiencies with the current Budget Users and systems prior to developing Program Budgeting for any new Budget Users. The exception to this has been the inclusion of Program Budget-ing for the Ministry of Finance, where they can see the benefits from operating in a more outcome focused environment. USAID/BearingPoint has been working with MoF and Budget Users review

and where necessary to refine of the current program structures and performance indicators to ensure there is a clear link between the Government of Montenegro’s Economic policy document and other strategic development plans.

The 2008 Budget Circular contained a number of important advancements from the previous year’s circular in terms of the depth of guidance and instructions for the development of the non-financial data for Program Budgeting.

The Ministry of Finance with the assistance of USAID/Bearing-Point staff conducted 14 workshops for Pilot Budget Users in the first week of September 2007. In preparation for these workshops, Budget Users received a brief report that focused on the key areas that need to be addressed in preparing their 2008 Budget submis-sions. This is a significant positive change of practice with the Min-istry of Finance now being actively involved in assisting Pilot Users improve the Performance Program Budgeting information based on best international practice. This hands-on assistance to Budget Users has continued with USAID/BearingPoint staff providing sug-gested improvements to the Budget Users submissions and work-ing with them to bring the performance information in line with international practices.

A noticeable difference of the 2008 Budget Rationale will be an improved layout. It is in a user-friendly format that captures the key activities, objectives and performance data for each budget user. Performance indicators are also a far more balanced repre-sentation of the performance of the organization. Previous years Budget Users focused on what goods and services they intended to deliver but in the 2008 Budget this has been balanced with in-dicators also measuring how efficiently and effectively these ser-vices will be delivered.

Finally, one of the key activities aimed at the strengthening the high level commitment of the senior Government officials to the ongoing implementation of Program Budgeting will be a high lev-el presentation by the Minister of Finance to Senior Government officials and representatives from the donor community on the findings and recommendations from the Program Budgeting Re-port, and government approved strategic framework for the way forward for Program Budgeting in Montenegro.

Dean BrownSenior Budget Advisor

USAID/BearingPoint

Program Budgeting in the 2008 Budget


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Provisions of the Article 25 of the Budget Law («official gazette of the Republic of Montenegro, No. 40/01,

44/01 and 71/05) stipulate that Ministry of Finance can suggest to the Government a special programme which will include receipts and expenditures of extra-budget-ary funds into the Consolidated Account of the Treasury and plan them as an integral part of the Budget of the Republic.

In accordance with these competenc-es, the Minister of Finance has formed a work group consisting of representa-tives of the Ministry of Finance and of all funds. The task of the work group is to consider all the possibilities and to sug-gest to the Government the most optimal solution - Programme for Inclusion of Extra-Budgetary Funds into the State Treasury System, of the following:

- Pension and Disability Insurance Fund of the Republic,

- Health Insurance Fund of the Republic,

- Employment Agency of the Republic of Montenegro,

- Development Fund of the Republic of Montenegro and

- Compensation Fund.The Project represents the continu-

ation of the reforms in the system of the Public Finance; therefore the suggestions provided in the Project must have the fol-lowing positive effects, at least:

- more efficient cash management and improved liquidity of the Budget of the Republic as well as of the extra-budgetary funds;

- Reduction of the State costs on the basis of interests on credits and banking commissions;

- Higher accuracy and efficiency of the consolidated reporting through more efficient processes of collection of public revenues and payment of liabilities of the Republic .

The experts of USAID and EU are also

involved in the work of work group and they will contribute to the achievement of such project that will in no way disarrange reforms in the field of Public Finance or have any negative effect on the function-ing extra-budgetary funds.

The work group has conceived the Legislation that defines competence and work of funds, structure of extra-budgetary receipts and the way of their usage in terms of including funds into the Treasury System, in order to provide the legal definition of the revenues (so that all revenues of funds are used for financing of their activity).

Revenues of Funds will be treated as earmarked revenues and they will serve exclusively for financing of costs of funds. The missing funds will be provided out of general revenues (current transfers to fund). In addition, funds will be directly included in the Information System – SAP, that is used by the Treasury of the Republic, therefore, everyday access to all the chang-es of the positions will be available.

The structure of the extra-budgetary expenses is defined in accordance with the Book of Rules on Unique Classification of Accounts for the Budget of the Republic, Budgets of Extra-budgetary Funds and Budgets of Municipalities («official gazette of Republic of Montenegro, No. 37/05 and 81/05) and in accordance with of funds needs, in order to provide the most ade-quate accounting records. If it is found necessary, for funds’ analytical monitor-ing of the expenditure by the funds, an Amendment to the existing Book of Rules will be made. For internal accounting records, funds will apply existing solutions until the adoption of the new Book of Rules, in which the solutions will be imple-mented that will adequately satisfy the need of all users.

It is estimated that detailed studying and analyzing of the existing legislation that defines competences and work of funds, financing issue, i.e. structure of the

receipts and expenditures and way of their usage in terms of inclusion the extra-bud-getary funds into the Treasury system, is essential for the realization of this project.

Therefore, it was suggested that solu-tions given in System Laws:

- Law on Pension and Disability Insurance (official gazette of the RoM», No. 54/04, 39/04 and 79/04);

- Law on Health Insurance («official gazette of the RoM», No. 39/04);

- Law on Employment («official gazette of the RoM», No. 5/02, 79/04 and 29/05);

- Law on Development Fund of the Republic of Montenegro («official gazette of the RoM», No. 46/92);

- Law on Restitution of Expropriated Property Rights and Compensation («offi-cial gazette of the RoM», No. 21/04)

- and their bylaws, that refer to the issue of financing and way of adopting of financial deeds of extra-budgetary funds, should be governed by the Law Amending and Supplementing the Budget Law.

The Ministry of Finance has pre-pared the Draft Law Amending and Supplementing Budget Law, established and submitted to the Parliament by the Government for consideration and adop-tion. Suggested amendments and supple-ments of the Budget Law, in the part that refers to extra-budgetary funds, were used to readjust the legislation in accordance with newly arising conditions.

Stanimirka MijovićIndependent Advisor

Inclusion of Extra-Budgetary Funds into the State Treasury System


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GENERAL TERMS

Medium-Term Programme of works for period 2008 - 2013 (hereinafter: the Programme), adopted by the Government of the Republic of Montenego (Decision No. 03-5982 from 27.07.2007) represents at the same time a strategy and a programme for directing of development of the state survey and real estate cadastre for the Republic of Montenegro in the next five years and which determines the type and the volume of the programme works, and fonds and sources for their realisation.

The Programme was made, first of all, in accordance with the provisions of the Law on State Survey and Real Estate Cadastre (“official gazette of the RoM”, No. 29/07- hereinafter: the Law), than obeying the applicable related rules which include the obligation of the Real Estate Administration regarding realisation of certains works from the sphere of state survey and real estate cadastre, and respecting obligations and tasks stemming from already adopted strategical development documents of the Republic, requests from a great number of users of cadastral data formulated and sent to the Real Estate Administration during the drafting of the Programme, and from recommendations from foreign documents and regulatory rules for this area.

AIM OF THE PROGRAMME

Aim of the Programme is defined in accordance with the new functional solutions from the Law, according to which for area of the Republic of Montenegro the following should be

done:1) Establishment of the state referent geodetic systems in

accordance with the needs of the Republic in cooperation with

Medium-Term Programme of Works on Survey and Design of the Real Estate Cadastre at the Territory of the Republic of Montenegro for Period 2008 - 2013

Fnished surveyPlanned surveyNot surveyed


20

necessary technologic connections with European reference systems and their standards;

2) Forming of the real estates cadastre on unsurveyed parts of the Republic of Montenegro and perform completion of existing data base of geodetic-cadastral data;

3) Forming of the cadastre of pipelines in all larger places as a unique and public record on pipelines and underground objects and rights on them;

4) Making of the Basic State Map, topographic and review-topographic maps and forming of the unique cartographic data base of the Republic;

5) Realisation of survey, marking and renewal of border marks on the state border, preparation of documents regarding the state border, forming of record on state border, and establishment of the service for its maintenance.

6) Forming of the registers of home numbers, streets and squares and register of space units;

7) Continuation of the activities on modernisation of existing geodetic-cadastre information system, and to have all data regarding the territory of the Republic of Montenegro, holders of real estate rights and other real rights provided in the digital form with the most objective accuracy and reliability and to be available for all interested legal and natural persons at any place and any time;

8) Continuation of activities on land territory regulation by agrarian regroupment;

9) Performing of reorganisation of the Real Estate Administration, modernisation and construction of area of Real Estate Administration and regional units for real estate cadastre and improvement of services on operations of conservation of the real estate and issuance of data;

10) Establishment of modern archives of documentation on state survey and real estate, and to establish modern system for protection of data;

11) TAdoption of new and innovation of existing bylaws in the sphere of state survey and real estate cadastre in accordance with the Law;

12) Modernisation of the education system of personnel for working on jobs of state survey and real estate cadastre (geodetic, legal, informatical and agricultural).

PROGRAMME SOLUTIONS

Programme will be realised through special sub programmes, which are determined on the base of the Law and whose scope and funds are determined based on the stated documents and requests from users, and their rationality in compliance with the following:

• Economic and development criteria which are considered from the point of: a) economic feasibility b) developmental influence;

• Financial criteria considered from the point of: a) height of investment, b) Cost-benefit analysis c) degree of provided funds, d) possibility of participation of funds of local self-government and public enterprises in the realisation of the project;

• Criteria of the influence on the environment;• Technical criteria considered from the point of: a) technical

feasibility, b) level of the determined technical standards.

Basic sub-programmes which will be realised in the medium-term period are:

Establishment of the State Reference Geodetic Systems (Basic Geodetic Operations)

Programme of works on establishment of state reference

geodetic systems of the Republic of Montenegro has derived from needs for creating of the modern mathematical base at the global and local level which serves for positioning, determining of the outer gravity field and geodynamic researches, for needs of the state survey, forming of informational system of the Republic with the European reference systems, and reference systems of the countries in the region:

Program of works encompasses:

• Realisation of the Space reference system in the form of the space reference base of the Republic of Montenegro (maintenance and upgrading of the permanent stations network, thickening of the GPS networks). Planned funds for realisation of works amount around 275.000 €.

- Creation of the new horizontal reference system (trigonometrical, polygon and town trigonometrical network). Funds planned for realisation of works amount around 700.000 €.

- Creation of the vertical reference system (network of levelling of high accuracy NTV2, town levelling networks). Funds planned for realisation of works amount around 785.000 €.

- Forming of the gravimetrical reference system (basic gravimetrical network and gravimetrical survey). Funds planned for realisation of works amount around 95.000 €.

- Determining of the geoid of Montenegro. Funds planned for realisation of works amount around 105.000 €.

- Horizontal and vertical connection of the existing and new state reference base. Funds planned for the realisation of works amount around 135.000 €.

Establishment of the Real Estate Cadastre on Unsur-veyed Areas in Which Cadastre and Registration of Land is Applicable and on Unsurveyed Parts in Which the Inventory Cadastre is Applicable

Programme of works refers to:

• Establishment of the real estate cadastre in areas where cadastre of land is applicable- on the territory of 22190 ha and in 25CM (Bijelo Polje, on the territory of 4005ha and 10CM; Mojkovac, on the territory of 1053ha and 2CM, Nikšić, on the territory of 15101ha and 11CM and Ulcinj, on the territory of 1031 and 2CM);

• Establishment of the real estate cadastre in unsuvreyed areas of the Republic, i.e. cadastral municipalities, where inventory cadastre is applicable- on the territory of 252.963 ha in 90CM (preview of planned works is given in the following tables);


21

Preview of planned works in 2008

ordinal Cadastral municipalitySurface CM (ha)

Number of the cadastral parcels

Number of the cadastral cultures

Number of objects

Number of deeds of land

1. Municipality Podgorica1. Cvarin 755 470 1.197 53 1312. Vrbica 688 710 1.509 84 1743. Medun 643 529 1.277 59 1274. Fundina 1.869 1.091 2.621 179 2545. Trmanje 2.041 1.272 2.768 27 1346. Rijeka 3.403 1.469 3.069 55 1567. Bioče 1.417 1.052 2.451 110 2118. Lutovo 2.305 776 1.901 28 629. Klopot 482 159 357 38 4710. Bolje Sestre 1.583 581 1.781 92 13711. Prelev Brijeg 1.807 700 1.488 101 15912. Grbi Do 555 383 765 36 6513. Duške 1.064 783 1.295 87 15814. Slacko 949 215 602 53 8115. Lopate 655 573 962 43 9816. Veruša 1.030 698 1.366 121 32617. Stupovi 1.054 407 1.513 56 9118. opasanica 6.000 503 1.457 79 15119. Trebišnica 1.766 641 1.514 44 11220. Lijeva Rijeka 533 492 845 60 9121. Donje Stravče 1.034 456 1.245 46 6622. Brskut 2.719 2.009 4.150 304 30923. Ubli 2.820 2.750 6.473 398 57124. Bezijevo 860 823 1.772 110 14125. Momče 1.618 879 1.828 120 15126. Donji Zatrijebač 1.285 752 1.709 85 13327. Gornji Zatrijebač 3.531 600 1.236 116 24828. Dinoša 2.402 1.738 3.008 253 44029. Koći 1.189 665 1.418 104 11730. Kržanja 1.780 1.264 2.361 160 248ToTAL: 49.837 25.440 55.938 3.101 5.189





Number of objects


1. Municipality Cetinje1. Trešnjevo 3.293 828 2.324 108 1642. Kobilji do 6.407 1.035 4.367 134 2233. Ubli 5.963 685 2.418 151 2264. Lastva 4.018 529 2.129 94 1395. Prentin do 4.081 924 2.889 124 2016. Bata 4.134 1.565 3.080 191 2287. Čevo 3.409 1.184 3.307 161 2458. Markovina 1.690 410 1.379 54 859. Velestovo 3.225 586 2.129 105 17410. Prediš 3.876 1.147 3.026 148 19111. Grab 2.477 2.053 3.993 158 22412. Resna 1.500 859 1.834 91 11313. Ćeklići 5.814 5.715 11.928 280 55214. Štitari 1.384 935 2.826 110 17015. Đinovići 3.399 1.696 4.549 179 355ToTAL: 54.670 20.151 52.178 2.088 3.290





Number of objects


1. Municipality Nikšić1. Bijela Gora 3.413 280 614 7 1342. Grahovac 1.930 609 2.199 100 1373. Grahovo 5.391 2.156 5.287 246 5584. Jabuka 2.861 385 2.087 70 1425. Nudo 1.455 774 2.245 115 2116. VIlusi 6.406 1.590 6.849 210 3857. Zagora 1.350 201 1.056 34 70ToTAL: 22.806 5.995 20.337 782 1.6372.Municipality Podgorica1. Hoti 3.508 1.791 5.240 233 3922. Stari Trabujin 1.740 441 1.128 78 1293. Gruda 1.614 855 2.176 133 2244. Budza 1.642 576 1.352 101 1605. orahovo 5.445 2.262 5.797 315 3476. Gornje Stravče 13.480 498 1.111 49 197ToTAL: 27.429 6.423 16.804 909 1.449


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Number of objects


1. Municipality Berane1. Azanje 1.223 1.910 11.648 120 9032. Bastahe 420 829 3.022 43 3183. Bubanje 727 1.217 1.088 92 934. Buče II 1.719 884 1.767 5 2245. Vinicka II 804 377 1.116 3 2826. Vrbica 2.452 2.831 3.600 249 3847. Vuča 1.018 1.580 1.813 40 4068. Glavica 793 3.037 939 76 1529. Dobrodolje 689 536 2.309 68 30710. Zaostro 1.670 3.483 4.608 186 45211. Zagrad 698 1.340 4.275 49 63112. Javorovo 2.575 1.166 4.877 119 38613 Kurikuće 4.121 3.994 1.926 96 39914. Lubnice 3.406 3.303 13.752 169 1.59615. Petnjica 730 1.645 693 227 7216. Polica 6.118 9.003 1.779 762 16117. Praćevac 605 538 924 42 8518. Radmanci 1.969 2.424 3.277 274 52319. Ruišta 613 742 2.710 25 30320. Savin Bor 3.847 1.752 3.364 147 56421. Skakavac 291 584 3.071 26 41522. Trpezi 2.721 2.140 458 245 13923. Tucanje 1.061 1.814 4.830 157 63424. Crni Vrh 1.630 2.754 1.931 123 29725. Štitari 780 1.940 1.543 124 111ToTAL: 42.680 51.823 81.320 3.467 9.8372.Municipality Mojkovac1. Bjelojevići 4.203 799 1.714 78 308ToTAL: 4.203 799 1.714 78 308





Number of objects


1. Municipality Andrijevica1. Gnjili potok 883 547 1.187 62 1462. Dulipolje 718 895 2.467 161 2143. Zabrđe II 3.050 1.389 1.507 2 4714. Jošanica 4.525 1.052 2.653 113 2875. Kralje 680 728 1.360 108 2326. oblo Brdo 1.052 768 1.523 80 1267. Sjenožeta 632 462 879 47 1088. Slatina II 1.302 1.045 1.257 15 2229. Trešnjevo II 1.479 640 930 0 267ToTAL: 14.321 7.526 13.763 588 2.0732.Municipality Žabljak1. Crna Gora 4.010 1.650 3.194 84 2212. Motački Gaj II 839 1 3 0 13. Pašina voda II 1.768 186 377 11 744. Tepca 2.802 912 1.688 91 2515. Žabljak II 1.201 3 13 0 1ToTAL: 10.620 2.752 5.275 186 5483.Municipality Bijelo Polje1. Bistrica 1.087 1.484 2.172 190 4092. Boljanina 1.732 1.446 2.288 169 4023. Goduša 1.554 1.254 1.823 134 3324. Godijevo 1.570 1.402 2.215 166 3685. Jablanovo 577 841 1.046 57 1196. Ivanje 1.355 1.354 2.075 141 2877. Korita 8.603 3.040 6.457 267 6198. Kostenica 1.124 1.067 1.631 121 2529. Kradenik 655 718 1.148 99 23910. Lozna 1.303 1.532 2.253 164 34111. Mojstir 1.173 1.125 1.435 86 15812. Negobratina 782 350 621 24 9513. Pećarska 1.653 1.891 2.949 212 41014. Radulovići 436 471 727 50 11615. Sipanje 513 374 574 36 13316. Srednje Brdo 1.635 723 1.636 72 18217. Crniš 645 545 836 57 137ToTAL: 26.397 19.617 31.886 2.045 4.599


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For realisation of the Programme on design of real es-tate cadastre on areas where land cadastre is applicable and unsurveyed parts of the Republic where inventory cadastre is applicable, planned funds amount 21.629.823 EUR (in 2008 - 4.226.893 EUR, in 2009 - 4.756.910 EUR, in 2010 - 4.018.800 EUR, in 2011- 4.520.180 EUR, in 2012 - 4.107.040 EUR).

Works on Modernisation of the Cadastre of Coastal Zone Management

works on modernisation of the cadastre of coastal zone management encompass: marking of the borders of the coastal zone, determination and marking of new parcels, filming of the border and the parcels of the coastal zone and collecting of data on their position, shape, surface and holders of rights, digital processing of filming data, corrections of wrong entries and presentation of data on cadastre to the public and updating of the data form the real estate cadastre.

For realisation of the Programme of modernisation of the real estate cadastre of the coastal zone management, funds are planned to the amount of 310.000 EUR.

Establishment of the Cadastre of Pipelines

At the area of the Republic, according to incomplete data, about 9000 km of underground lines were built: telecommunications– 2900 km, water supply – 2200 km, faecal sewerage – 500 km, atmospheric sewerage – 300 km and electric lines – 3100 km.

Programme of works refers to: • Establishment of the cadastre of pipelines in municipalities

in which it does not exist,• Establishment of the cadastre of pipelines in municipalities

in which it is partially established in the prvious period. For realisation of the Programme of establishment of the

cadastre of pipelines it is necessary for special funds to be provided to the amount of 9.062.000 EUR. From these funds the Republic needs to provide 1.812.400 EUR (20%) and munici-palities and users and owners of the pipelines the remaining amount of 7.249.600 EUR (80%).

Basic State Map, Topographic and Review-Topographic Maps

By donation of the Government of the Japan in 2007 making of digital topographic map of proportions 1:25000 has started for 70% of the area of Montenegro (93 sheets of the map, picture 4.6 below). The project will be realised until 2009. Remaining 35 sheets of the map will be made after 2009. Value of works is 415.000 EUR.

Basic state map in proportion 1:5000 (918 sheets in total)

will be made by the procedure for making of the new map in

digital form based on the new air-filming. Value of these works is 5.178.282 EUR.

For drafting and updating of the remaining topographic and review-topographic maps of Montenegro, funds are planned to the amount of 110.000 EUR., and for keeping of all cartographic works a special sector will be formed for national cartography in the Real Estate Administration.

Survey, Marking and Renewal of Border Marks at the State Border and Forming of the Record on the State Border

Montenegro has inherited the part of the border of the former SFRY with Albania, while adequate defining of border with other neighbours is not finished. Total length of the State border is: with the Republic of Croatia 41,7 km (land - 19,7 and sea - 22), with the Republic Bosnia and Herzegovina 254,4 km (land - 204,5; rivers: Piva, Tara and Ćehotina - 38,2; and Bilećko Lake - 11,7), with the Republic of Albanija 207,2 km (land - 113,3; sea - 22; Skadar Lake - 38,8; and rivers: Grnčar, Cijevna, Bojana and Kravarski potok - 33,1), with the Republic of Serbia 244,1 km (land - 234,1 km; and rivers: Lim, Šekularska rijeka, Pećka Bistrica and Sušanski potok - 10 km) out of which 75,6 km towards Kosovo (land - 72,4; and rivers: Lim, Šekularska rijeka and Pećka Bistrica - 3,2 km) and at the open sea 93 km.

Recent works on survey, marking, maintenance and renewal of the border marks at the state border and keeping files of the state border were performed by the former Ministry of Foreign Affairs of the State Union Serbia and Montenegro, and after that Ministry of internal affairs and public authorities.

Programme planned forming of the new records of the state border and the special sector for execution of works on survey and maintenance of the state border in the Real Estate Administration.

Total planned funds for survey and forming of the new records on state border amount 1.412.000 EUR.

Regtister of House Numbers, Streets and Squares and Re-cords of Space Units

In accordance with the applicable regulations, records on names and borders of settlements, streets, squares nad numbers of buildings have been kept by the Real Estate Administration and Municipal authority competent for communal works, in cooperation with the competent body for statistics works.

Forming of new register of house numbers, streets and squares, and space units is planned with this Programme. Planned funds amount 1.980.000 EUR

Geodetic – Cadastral Information System of the Republic

Records of geodetic-cadastral data on real estate and property rights on it were by now kept by Real Estate Administration which, starting from 1992, has developed the


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software called TerraSoft which also supports many functions of the information system.

As a result of the analysis of the current situation and new needs pursuant to the Law and requests of users, the Programme fo works provides the modernisation of the Geodetic-Cadastral Information System, i.e. improvement of the existing hardware infrastructure (hardware, communi-cation infrastructure, specialised equipment), and of the existing software infrastructure (operative system, system for management of the data bases, system software for business communication, protection and anti-virus programmes, implementation of the production modules etc.), aiming the increase of the productivity and providing of the quality of service of the Real Estate Administration. Planned funds amo-unt 3.912.000 EUR.

Restructuring of the State Territory by Land Management

In the period from 1998 to 2002 at the area of the Republic of Montenegro, smaller works were done on restructuring of the land territory by land management.

Programme of works on restructuring of the State territory by land management, partially refers to the works envisaged by the Development Strategy for food production and rural areas, and finishing of the works in progress.

In Montenegrin agriculture there are numerous limitations and one of them is very pulverous property with low level of intensity. Production in aggravating conditions on very pulverous properties does no enable stronger modernisation of agriculture.

Maximal effects of invested funds can be expected only in case when the programmed activities of restructuring and protection of agricultural land are performed in the procedure of land management and when they are managed together by Ministry of Agriculture, Forestry and water Management and Real Estate Administration.

In this Programme, the Real Estate Administration has identified only about 240ha which should be restructured by land management and for that the funds are planned to the amount of around 48.000 EUR.

Reorganisation of the Real Estate Administration and Modernisation and Construction of the Premises of the Real Estate Administration and Regional Units for Cadastre of Real Estates

Recent Real Estate Administration was organised in accordance with the functions from the previous Law and regulations on work of governmental bodies. In performance of activities from its competence in Real Estate Administration about 350 people have been employed, which are assigned to jobs in the headquarters of the Administration, and in regional units.

Real Estate Administration, for efficient performance of

works and services, does not have appropriate business space in the headquarters of the Administration in Podgorica, nor in centres of regional units in municipalities.

Reorganisation of the Real Estate Administration will be performed in accordance with the basic functions determined by the Law and the Strategy for Administrative Reforms in Montenegro - 2002-2009. As for the Law, those are the mentioned functions, while for the Strategy of the Adminsitrative Reforms, reorganisation of the Real Estate Administration will specialy realise:

• optimisation of the number of employees, transfer of authorisations, in accordance to the Law, to geodetic organisations (enterprises and entrepreneurs) i.e. transfer of administrative and professional works which are not considered to be works of the government bodies;

• Control of the performance of works and responsibility of geodetic organisations and stimulation and professional training for performance of the most complex professional works or the state survey;

• Adequate preparations for providing of services to citizens (consistency of the orientation towards the client and viewing of the citizens as valuable consumers) at lower system levels (cadastres in municipalities);

• Modernisation of work of Real Estate Administration through: programme of regular training of employees, introducing of knowledge of foreign language and computer literacy as minimal criteria for admission of new co-workers, introduction of modern techniques of management, introduction of the system form monitoring of the work results etc.

Aiming improvement of the quality of services to users and improvement of working conditions for employees the Programme plans the construction of the business object in Podgorica and modernisation and procurement of the functional business object in regional units.

Estimated value of the object and equipment amounts around 5.700.000 EUR.

Archive of the Documentation on State Survey and Real Estates

Documentation on real estate survey was kept in the current archive in the headquarters of the Real Estate Administration, and in regional units. The analysis of the current situation has determined that additional modernisation of the archive system is necessary, and significant improvement of providing services to users of geodetic and cadastral data. Modernisation of the Archive will be realised with the procurement of the adequate office equipment for filing and physical protection of archive and other documentation, procurement of the technical systems for keeping and protection of digital data, by forming of the data catalogue on: geodetic network, Basic State Map and topographic and review-topographic maps, establishment and work of multipurpose system for data distribution and forming of the library for the Real Estate Administration.

For realisation of the Programe of Modernisation of the State Archive of the Documentation on the State Syrvey and Real Es-tates funds are planned to the amount of 270.000 EUR.


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Adoption of New and Inovation of Existing Bylaws in the Sphere of the State Survey and Registration of the Real Estate Rights

obligation of adoption of new and innovation of existing bylaws stems from the Article 174 and 175 according to which the Government and the Ministry of Finance, on suggestion of the Real Estate Administration, should in the period of two years bring around 20 bylaws.

For realisation of the Programme funds are planned to the amount of 157.500 EUR.

Education of the Personnel for Work in the Area of the State Survey and Cadastre of Real Estates

Realisation of the Programme can be successfully performed only with capable staff of the geodetic, legal and computer profession. In that sence, adequate activities are planned on: modernisation of the high-school education system of geodetic education of human resources (several new functions were introduced by the Law in the area of state survey and real estate cadastre which requires also appropriate adjusting and modernisation of high school education in Montenegro); providing of material and other support on the continuation of education of about 50 engineers of geodesy and geoinfromatics (Bsc) and 100 of graduate engineers of geodesy and geoinfromatics (Msc) at the current Study programme Geodesy in the period until 2012; training of around 80 jurists with rank Msc at the Law Faculty in Podgorica for jobs of the real estate cadastre in the period until 2012.

FINANCIAL FUNDS AND SOURCES OF FINANCING FOR THE REALISATION OF THE PROGRAMME

Total needed funds for the realisation of the Programme amount 52.969.127 EUR, or: 2008- 16.339.538 EUR; 2009.- 10.786.827 EUR; 2010.- 8.936.858 EUR; 2011.- 8.881.764 EUR; 2012. - 8.024.140 EUR.

Pursuant to the Article 176 of the Law, funds for realisation of works from the Programme will be provided from the following sources:

1) General income of the Budget of the Republic;2) Revenues from compensations for use of data on survey, real estate cadastre and cadastre of lines and compensations form

providing of services;3) Share of the tax on turnover of immovable property to the amount of 5% which belongs to the Budget of the Republic;4) other sources (donations, credits and other)

Programme year

Sources of financial assets

ToTAL(EUR)

Budget of the Republic(EUR)

Revenue from com-pensations for use of data and providing services(EUR)

Share of the tax on Turnover of Immov-able property(EUR)

other sources (donations, credit)(EUR)

2008. god 16.339.538 - - - 16.339.538

2009. god 10.786.827 - - - 10.786.827

2010. god 8.936.858 - - - 8.936.858

2011. god 8.881.764 - - - 8.881.764

2012. god 8.024.140 - - - 8.024.140

ToTAL: 52.969.127 - - - 52.969.127

REAL ESTATE ADMINISTRATIoN


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INTRODUCTION

Project was made in September 2007, by the Real Estate Administration and it was made in accordance with the priorities established based on claims stemmed from Strategy for development of the traffic of Montenegro, in the part related to the construction of the Highway Podgorica-Andrijevica, Berane-Bijelo Polje, and from requests for data to be provided as the base for conduction of expropriation for construction of the Highway and simultaneously, to make digital cadastral plans with the altitude presentation of the terrain as a basic geometric ground for making of the technical documentation for construction of the Highway (of general design and main project).

In accordance with that a decision was made to have on the planned route for the Highway, established the real estate cadastre in 17 cadastral municipalities of the area of municipality Bijelo Polje on the surface of 26.397ha, 3 cadastral municipalities of the area

of the municipality Berane on the surface of 3.177ha, 3 cadastral municipalities of the area of the municipality Andrijevica on the surface of 2.195ha and 14 cadastral municipalities of the area of the municipality Podgorica on the surface of 20.372ha, or in the total surface of 52.141ha (the picture below).

PROCEDURE OF EXECUTION OF WORKS

works on establishment of the real estate cadastre will be realised, above all, in accordance with the Provisions of the Law on State

Survey and Real Estate Cadastre (“official gazette of the Republic of Montenegro”, No. 29/2007 – hereinafter: the Law), in the part referring to the previous drafting of the technical documentation (main project) based on which the works will be executed, monitoring will be performed and checking of deadlines for execution of some phases and total execution of works.

Due to extremely short deadlines and for the fact that in Montenegro geodetic organisations haven’t still been qualified for performance of large and complex works, as it is the establishment of the real estate cadastre on large surfaces. Main project of establishment of the real estate cadastre, based on previously defined project goal, was drafted by the Real Estate Administration, provided its external technical control, approached the execution of preparation and other works on with its own capacities and provided the external competent professional supervision during the execution of works.

By compliance with legal procedure in the drafting of the project and its realisation it is expected that the works on establishment of the real estate cadastre on the area of 52.141ha and in 37 cadastral municipalities will be over in the inflicted deadline, or by 31.12.2008.

PROJECT SOLUTION OF GEODETIC WORKS Prior to performance of survey by Real Estate Administration, in ac-

cordance with the Law and the Capital/Main Project, every holder of property rights on real-estate and user of real estates which is public property on the area on which the survey is being performed, in a stipu-lated manner and bearing expenses for marking with permanent marks on his own borders of the parcels and objects which are satiated on it and photo-signalises them with visible signals for needs of filming from the air.

State survey will be performed with application of the aerial-photo-grametrical method of filming of the terrain with the airplane and the camera of the Real Estate Administration (the picture below).

Establishment of the Real Estate Cadastre on Regions of Municipalities Podgorica, Bijelo Polje, Andrijevica and BeraneReal Estate Administration has initiated the realization of the Medium-Term Programme of Works on Survey and dDesign of the Real Estate Cadastre for Period 2008 – 2013 by approaching to the drafting of the Project on Establishment of the Real Estate Cadastre on Regions of Municipalities Podgorica, Bijelo Polje, Andrijevica and Berane.


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Based on the digital photogrametrical material, prepared accord-ing to related regulations, making of the digital ortophoto plans will be realised in colour in proportion 1:2500 (DoF2.5) and digital cadastral plans in proportion 1:2500 with altitude presentation (from the digital model of the terrain).

Cadastral plans will be made in proportion 1:2500 in digital vector shape and in adequate formats, and contours will be generated form the digital model of the terrain with the equidistance of 2,5m.

Data on real estates (on position and rights on them) collected in the procedure of the state survey and based on the available documen-tation, will be formed in the form of elaborate for presentation and will be presented to the public aiming determining of the property rights and other real rights referring to the property rights holders.

After the finished submitting for public consideration and deter-mining of the data on survey of real estates, and of data on rights real estates, a new real estate register, and new data base of data on real estate cadastre.

All data on survey and real estate cadastre will be in a digital form.

ORGANISATION OF EXECUTION OF WORKS

Total deadline for finishing of works is until the end of December 2008, and interactivities are planned in so called Gant diagram (the picture below).

Total number of planned field and office quota of days of experts is about 10600. works, during 15 months, on average will be executed by 15 to 25 experts of geodetic and juridical profession. Help of workers-staff men from the local area will also be used at the field.

CONCLUSION

works on establishment of the real estate cadastre on un-surveyed parts of municipalities Podgorica, Bijelo Polje, Andrijevica and Berane, will be executed by outside the Administration on works on control of the technical documentation and supervision of execution of works.

we are talking about the most complex works in this sphere, and experiences in their realisation will be used for execution of similar works in the remaining part of the Republic, in accordance with the Medium-term Programme. Their realisation in the planned time of completion will bring significant savings of funds planned for that purpose.

REAL ESTATE ADMINISTRATIoN

Real Estate Administration, based on the Article 62 of the Law on State Survey and Real Estate Cadastre (“Official gazette of the RoM”, No. 29/2007), announces

ADDOn submitting for public consideration of data on survey and cadastral classification of

land and determination of real estate rights for CM _________________________

Holders of property rights and holders of legal interest are being informed that in the

period from ___________ to __________ year a submitting for public consideration will be done of data on survey and cadastral classification of land and determination of the real estate rights, and establishment of the real estate cadastre for the CM ___________________________ . Works of submitting

will be performed by the Commission for Submitting which will work in the premises ______________________________________________

every working day in the time from ____ to ____ .

Preparation worksDetermination and marking of cadastral territorial units

Detection and photographing of geodetic network

Determination of the geodetic network (orientation of poits)Photogrametrical filming of the terrainMaking of photogrametric productsDecodingCollecting of data on real estatesDrafting of digital cadastral plansCalculation of surfaces of cadastral parcelsCadastral classificationSubmitting of data for public considerationBuilding and confirmation of data base

Diagram of activities on establishment of the real estate cadastre


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Ministry of Finance and the Housing Commission of the Government of the Republic

of Montenegro have initiated the Project „250 housing credits“, with the intention to answer a great number of requests based on unsolved, or inadequately solved housing issue of employees in the public administration.

This Project is the continuation of the last-year „1000 housing credits“, which was designed in order to help the certain number of citizens, and to employees in the public administration bodies, in solving of the housing problem, through the granting of credits for buying of new housing objects, and through credits for enlargement and reconstruction of existing housing units.

That project envisaged: 200 credits for reconstruction to the amounts up to 5.000 €; 300 credits for enlargement of the housing space to the amount up to 15.000; and 500 credits for solving of the housing problem to the amounts up to 30.000 €.

In accordance with the positive experiences during realisation of the earlier project, larger number of new requests for housing credits, and of obligation which stemmed from the promise that this project will last for many years, Ministry of Finance, in cooperation with the Housing Commission of the Government of the Republic of Montenegro, initiated the new Project „250 housing credits“, which will be realised during 2007. opposite to the last year project, credits provided with the new project are intended for employees in the government administration bodies, and for those employed in the health institutions. From that number, 200 credits were designed for employees in the public administration bodies, while 50 credits were intended for persons working in the health institutions.

Ministry of Finance has, as in the previous project, in contact with the commercial banks determined the

conditions under which the credits will be granted. The new project provides the 250 housing credits to the amount up to 50.000 EUR, to the repayment period of up to 30 years, and the interest rate of 7%. Also, it is suggested by the Project that the Government should subsidize the interest rate with 3% on the yearly level, while the interest for the end user would amount 4%. The Government of the Republic of Montenegro is providing the funds for the subsidizing of the interests from the funds designed for solving of housing needs.

Terms of crediting for the project are determined with the following comme-rcial banks: Crnogorska komercijalna banka, Hypo-Alpe-Adria banka, Prva banka Crne Gore, NLB Montenegrobanka, Podgorička banka - Societe Generale Group AD

on terms agreed with the banks, the Ministry of Finance has informed the work group “For preparation of enforcement of the procedure of credit borrowing of employees in the government administration”, formed by the Housing Commission of the Republic of Montenegro. After the approval by the work group on the terms of crediting, agreed with banks, Contracts have been signed on 05.09.2007, between the Housing Commission of the Government, Ministry of Finance and representatives of five Montenegrin commercial banks.

Commission has formed a work group, whose assignment was to prepare the procedure for realisation of the project. work group has determined the methodology and way of schedule of credits per government bodies, and determined the number of credits belonging to each body. Distribution was made in accordance with the number of employees in each body, based on which governmental bodies received a certain percentage share in the total number of 200 housing credits. Also, Health Insurance Fund of the Republic, has made a table of the distribution of 50 credits, to

health institutions and the stated table submitted to the work group.

After the determination of the methodology of distribution of credits, work group has accepted the tables for distribution of 250 housing credits, and reported about that to the Housing Commission of the Government of the Republic of Montenegro. Commission has accepted the tables and authorised the work group to inform each government administration body on number of credits, assigned to them by distribution.

work group has, at the end of the August 2007, forwarded the information to bodies, with request from bodies to conduct the legal procedure of adverti-sing and election of the candidates for the assignment of credits, and to submit the lists of candidates to the work group by the end of the october.

After the submitting of lists by the state bodies, work group will forward the lists to the Housing Commission of the Government of the Republic, which will consider and verify them. After their verification, the lists will be sent to all banks, for conclusion of individual contracts between the government servants, to which credits were approved and commercial banks.

Dragan Darmanović Senior Advisor

Project „250 Housing Credits”The new project provides the 250 housing credits to the amount up to 50.000 EUR, to the repayment period of up to 30 years, and the interest rate of 7%. Also, it is suggested by the Project that the Government should subsidize the interest rate with 3% on the yearly level, while the interest for the end user would amount 4%. The Government of the Republic of Montenegro is providing the funds for the subsidizing of the interests from the funds designed for solving of housing needs.


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1. INTRODUCTION

what do these two documents with common name represent, and why one country initiates their drafting? what are the obligations and what is the role of the Ministry of Finance in that process?

Montenegro will after the signing of Stabilisation and Association Agreement start a new phase of nego-tiations with the European Union and promote the dialogue. Aiming facili-tation of the dialogue, and of obliga-tions stipulated by the Stabilisation and Association Agreement, Montenegro prepares comprehensive documents based on which European Commission will evaluate meeting of criterions for acquiring of the status of the country candidate, and after that for entering the European Union. Therefore, basic idea of drafting of this kind of documents is, primar-ily, facilitation of the dialogue of one

country with the European Union, and preparation of the administration for new challenges, tasks and obligations which stem from contractual obli-gations. Documents are of perennial character and are updated every year.

2. NATIONAL PROGRAMME OF INTEGRATION – NPI

National Programme of Integration was created from the liability stipulat-ed by the Article 72 of the Stabilisation and Association Agreement, which envisages that Montenegro must, through special programme, insure the gradual harmonisation of all exist-ing laws and future legislation with the legal regulations of the European Union (Acquis) .

This perennial document will, beside the obligations of implemen-tation of the Acquis in the domestic legal system, deal with the economic, political and administrative criterions

which should be met on the way of accession to the European Union. Basically, NPI is the is similar to the National Programme for Adoption of the Acquis - NPAA, which all the coun-tries with the status of candidates prepare.

Government of the Republic of Montenegro has in June this year formed more inter-sector work groups, whose assignment will be drafting of certain parts of this document in accordance with the suggested struc-ture.

obligations of the Ministry of Finance, specifically Department for Economy, Finance, International Cooperation and Games of Chance are related to the coordination of activities on drafting of the second part of the document - Economic cri-terions and the third part of the docu-ment (chapters from competence of the Ministry of Finance) - Capability of taking over of the obligations caused

Drafting of the National Programme of Integration (NPI) and Economic and Fiscal Programme (EFP)

1 - With planned Agreement on Stabilization and Association, Montenegro enters the new contractual relation with the European Union, i.e. formally and practically enters the association process.2 - Acquis communautaire – in French - common abbreviation Acquis, (Aki), means legal heritage of EU – set of rights and obligations which obliges all countries members and connects them within the EU. Acquis communautaire represents a wider concept than the classical term of right because it encompasses: contents, principles and political goals of the institutional acts; legislation adopted by applica-tion of the institutional acts and verdicts of the Court of Justice of European Communities, declarations and resolutions adopted by the EU, measures which refer to the common foreign and security policy, measures which refer to the justice and internal affairs, international contract concluded by the EU, and contracts between the member countries at the area of EU. States which wish to become members of the EU have to accept decisions from the institutional acts and to adopt Acquis communautaire.


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by the membership.

Second part of the document regarding the Economic criterions from the Copenhagen, implies giving of explanations regarding the degree that Montenegrin economy reached the level set by the Copenhagen cri-terions, and which measures will be taken in case of not meeting of one of criterions in order to reach the wanted level.

Third part of the document means giving the overview of the degree of harmonisation of the Montenegrin legislation with the Acquisom. work on drafting of this part of the docu-ment requires for a number of activi-ties on identification of regulations of EU regarding the certain areas, by insight in their content by competent authorities and drafting the final text after that. Third part will, basically, rep-resent the picture of the current state in the legislation, harmonisation level, short-term and long-term priorities, and quantification of needed funds for finishing of the harmonisation pro-cess with the European legislation.

Regarding the drafting of these chapters, several meetings were held in the Ministry of Finance of inter-sector work group, individual assign-ments were distributed and deadlines for submitting of first versions of texts are determined.

3. ECONOMIC AND FISCAL PROGRAMME 2007 – 2010 (EFP)

Montenegro has for the first time last year participated in the drafting of the Economic and Fiscal Programme, which is created in 2006 by European Commission with the intention to be constituted by the countries with the status of candidates and countries potential candidates. Basically, the programme should be the prepara-

tion of the country for drafting of the Pre-Accession Economic Programme- PEP after the gaining of the status of the country candidate. In the long-term perspective Economic and Fiscal programme presents the guidelines set by the Lisbon strategy, and for the Convergence Programme, which is made after the membership.

Economic and fiscal programme should show the facts which indi-cate the achieved progress, realised through the development of the insti-tutionalised and analytical capacities in the area of public finances and eco-nomic policy, and the projections and planned trends in these areas for the three-year period. That is necessary for a country candidate to realise more intense dialogue on economic poli-cies with the European Commission, especially in the sense of meeting criterions for entering the European Monetary Union.

European Commission has sent to the Ministry of Finance in the July 2007, the invitation for drafting of the new EFP, because the practice is in all countries that the Ministry of Finance coordinates the operations on that document. Suggested structure was modified when compared to the pre-

vious year, so that the requests set by this document are completely identi-cal with the Pre-Accession economic programme, which indicates that the European Commission intends to intensify the dialogue on economic policies with Montenegro.

Ministry of Finance has formed inter-sector work group in June this year which will work on drafting of the EFP. Also, international experts have been engaged, which will pro-vide consultant help, and currently are underway activities on drafting of the parts of the document- according to individual assignments of members of the work group. Document will be sent to the European Commission in the estimated period, by 1st December this year.

4. CONCLUSION

These types of documents are drafted aiming the improvement and promotion of the communication of one country with the European Union on its way to the enrolment, both with the same goal. As for the ques-tions to which the documents give answers, we can conclude that NPI mostly focuses on the legal frame-work, while the EFP concentrates on the questions of public finances and economic policies and gives more specific and qualified assumptions for the medium-term period. However, NPI is by its structure more compre-hensive, because beside the legisla-tion it encompasses also the econom-ic, legal, political and administrative criterions which should be met in the association process.

Bojana BoškovićSenior Advisor


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Law Amending and Supplementing the Law on Restitution of Expropriated Property Rights and Compensation

is published in the “official gazette of the Republic of Montenegro” No. 49/07 and has entered into force on 18th August 2007. This Law continuously provides the regulation of conditions, way and procedure of restitution of expropriated property rights and other property rights and compensation to former holders for rights expropriated in favour of national wide, national, public or common property, which were applied in the recent application of the Law.

By the Law will be formed, instead of municipal, three regional commissions for conduction of first instance procedure, in Podgorica, Bar and Bijelo Polje, which will take over the documentation of recent munici-pal commissions. Commission in Podgorica will be formed for territories of municipalities Podgorica, Danilovgrad, Nikšić, Šavnik, Plužine and Cetinje; Commission in Bijelo Polje will dispose of cases for territories of municipali-ties Bijelo Polje, Berane, Kolašin, Andrijevica, Plav, Rožaje, Mojkovac, Pljevlja and Žabljak; and Commission in Bar covers the territories of municipalities Budva, Herceg Novi, Tivat, Kotor, Bar and Ulcinj. The Law also provides forming of Commission for conformation of the procedure, which will certainly give new quality to their work. .

First instance commissions are formed at the level of the Ministry of Finance. Because of that, second instance procedure is moved from the Ministry of Finance, and and Law Amending and Supplementing the Law on Restitution of Expropriated Property Rights and Compensation it is stipulated that a Commission for Complaints is to be formed, appointed by the Government of the Republic of Montenegro.

News in the Law is that there is more ways of payment of the compensation amount: bonds, money and debt redemption, and payment of the tax based on this. Each citizen who acquires the decision decides in the Fund if he/she will use bonds or the compensation will be paid in money.

Compensation in money is being paid in annual instalments, whose payment is being

realised on 15th July every year by final deci-sions submitted to the Compensation Fund until 31st December of the previous year, and dynamics and way of payment is deter-mined by the Government of the Republic of Montenegro. Determination of the Law is that the total amount of compensation which is being paid to the former owners can-not annually exceed 0,5% of Gross Domestic Product (GDP) from previous year for which it is officially known from data of the competent institution for statistics, while the total amount of compensation by this law cannot exceed 10% of GDP for period of its application.

Duration of all issued series of bonds is 10 years from the entering into force of the Law Amending and Supplementing the Law on Restitution of Expropriated Property Rights and Compensation. It can be traded in bonds on the secondary equity market. Bonds can be used for purchase of stocks, shares and other property of the Republic of Montenegro and state funds (Development fund, Pension and Disability Insurance fund and Employment agency) for which the Government of the Republic of Montenegro determines that can be bought by the bonds of the Compensation fund. Also, bonds can be used also for pay-ment of tax liabilities, which are the revenues of the Republic, but this possibility can be used only by former owners and their successors, and not other acquirers of bonds from the equity market.

The owner of bonds has a right to, after the expiration of 36 months from the day of acquisition of bonds, eventually unused amount of bonds return to the Compensation fund and demands repeated acknowledge-ment of right on compensation in money to the amount of returned bonds.

with this Law Amending and Supple-menting the Law on Restitution of Expropri-ated Property Rights and Compensation, right is determined for churches and religious congregations to declare, for records, the property which was expropriated from them at the territory of the Republic of Montenegro in favour of national wide, national, public or common property, without just or market compensation. Submission of application does not represent the claim for restitution of expro-

priated property or compensation for that property, considering that the conditions, way and procedure in these cases will be arranged by the special law. So, those records will serve for considering of liabilities of the state on these grounds and as a database for adoption of the new Law on Restitution of Expropriated Property Rights and Compensation to church-es and religious congregations.

Furthermore, the news in this Law is that the object of restitution is also the confis-cated property, if such confiscation was done because of political or ideological reasons.

Considering the fact that the recent law preferred restitution in kind, this determina-tion remains and is increased in a way that law amending and supplementing envisages that the property expropriated by so-called revolu-tionary laws can be returned also in the zone of national parks and coastal line. of course, estates in these zones and their management are arranged by special laws.

one of news in the Law is that the Compensation fund is now a party in the pro-cedure of decision-making regarding claims for restitution or compensation to former own-ers, with which the role of that body is deter-mined at the level adequate for its importance and implementation of this law.

Also, Decree on evaluation of value and determination of compensation for expropri-ated property rights will be innovated.

on the solution of questions which are subject of the Law on Restitution provisions of the law are also applied which stipulate property-legal relations, obligation relations, inheriting, administrative procedure, executive procedure and other laws, if they are not in the defiance with the Law on Restitution.

For harmonisation with the provision of the Law on the Administrative Procedure, which refer to the application of the Law, obligation of keeping of records is stipulated for the Fund and for the regional commissions, which are obliged to submit the monthly report to the Ministry of Finance, which will improve the quality of information on the state of the debt of the republic on this ground.

Maja Mitrović,Independent Advisor

Law Amending and Supplementing the Law on Restitution of Expropriated Property Rights and Compensation

The news in the Law is that there are more ways of payment of the restitution amount: bonds, money and debt redemption, and payment of the tax on this ground. Each citizen who receives the decision should decide in the Compensation Fund whether he/she will use bonds or the restitution will be paid in money.


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DESCRIPTION

PEMPAL is a peer-based, capacity-building initiative organized for the ben-efit of Eastern European and Central Asian public finance management pro-fessionals. It includes public expenditure management leaders from Moldova, Lithuania, Slovenia, Montenegro, Ukraine, Belarus, Kyrgyzstan, Tajikistan, Turkey, Azerbaijan, Armenia, Macedonia, Bulgaria, Slovakia, Georgia, Albania, Serbia, Uzbekistan, Romania, Poland and other locations. However, PEMPAL is an organization composed of indi-vidual officials, not a formal organization of member countries. It is very similar to a professional association but it has unique characteristics that differentiate it from a simple grouping of like- mind-ed members.

Similar to an association, it engages in two common activities:

Peer Learning

Professionals in any field know that we are particularly interested in the work being done by our peers. we want to learn from their experiences both good and bad. we do not want to repeat their mistakes; but, more impor-tantly, we want to learn “what works.” we want to know how similarly-situated practitioners understand and attempt to meet the challenges that we face

daily. Peers have a special authority and credibility. Unlike academics or consul-tants who often work outside current professional and geographic realities, true peers are perceived as “being in the same boat.” Most professionals are more open to hearing about and studying their peers activities and results. we see these as both relevant to our work and realistic, in comparison to ideas offered by people who come from different sys-tems and job responsibilities. A profes-sor or an outside expert from the private sector may make valuable observations about what practitioners do in public finance management. However, outsid-ers do not enjoy the legitimacy given to the advice and comments of those

who do the same type of work on a daily basis.

Benchmarking

For PEMPAL purposes we will define this term as the mutual comparison of public finance systems and practices, through which participants can gauge their relative public finance develop-ment and progress. Benchmarking serves as one of the most common activ-ities in which peer professionals engage. It is a natural result of peer interactions. To understand better exactly what we do, we need to know how others do the same thing. Informal benchmarking starts when we are children and never

Public Expenditure Management - Peer-Assisted Learning (PEMPAL) Initiative in Europe and Central Asia


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stops. we not only want to know how we rank in direct comparison to others, but we also want to use accurate and fair metrics or performance indicators to make the measurement. In school, we want to know exactly how the teacher will grade our examinations and deter-mine our place in the class. we expect the marks to be legitimate and without prejudice or exceptions. In business, managers ask government to create a “level playing field” of regulatory poli-cies so that they can compete fairly. In government, we want to adapt, create or accept formal devices that allow us to determine our place within our various disciplines. PEMPAL enables its mem-bers to do all three.

Another similarity to professional associations can be found in the struc-ture of PEMPAL. while it has a uni-fied, over-arching structure and holds plenary meetings, it has divided itself according to Communities of Practice (CoP) focused on sub specialties within public finance:

• Budgeting• Treasury/Information Systems• Internal Audit• External Audit

Division into these subgroups is use-ful for both peer interactions and bench-marking, since each distinct community of practice offers an enriched focus on technical specializations that are essen-tial to any nation’s public finance man-agement system. Each Community of Practice area addresses complementary yet unique roles. For example, treasury specialists practice techniques that exe-cute the budget as it was formulated and documented within the budget department; and treasury-produced data is vital to budget analysis, report-ing and auditing.

Many professional organizations use similar subdivisions to attract par-ticipants who have both thematic and specialized interests. organizations of employers, elected officials, accountants, lawyers and doctors come to mind.

Similar to other groups, PEMPAL also brings technology into play to carry out its purposes. It employs videoconfer-ences, websites and telephonic interac-tions as fundamental tools.

SPECIAL FEATURES

But PEMPAL also has its unique fea-tures. For example it has decided that a joint Secretariat should be based in Slovenia at the Center of Excellence in Finance. The Center has developed as a mutual capacity development orga-nization used by finance ministers from many southeastern European countries. It has expanded its influence and use-fulness into much of the ECA region, as Azeri’s, Armenians and Moldova’s came to its classes. with a sustaining appro-priation from the Slovene Government and an extensive network of donors, the Center of Excellence in Finance enjoys the confidence and respect of public expenditure management practitioners. Hundreds of regional practitioners have attended its classes, developed its cur-riculum and met their peers at Center of Excellence in Finance events. Thus it exists as a unique regional resource that has no exact duplicate in other places around the world.

The world Bank has decided to pro-vide a three year grant to the Center of Excellence in Finance to serve as the PEMPAL Secretariat and website admin-istrator. As a result, PEMPAL will operate administratively from inside the ECA Region, under local institutional leader-ship. More information about the Center of Excellence in Finance is available at: www.cef-see.org

Another distinctive feature of PEMPAL is the support it receives from a broad consortium of donors, led by Britain’s DFID, the world Bank, Germany’s Inwent & GTZ, the Swiss State Secretariat for Economic Affairs (SECo), the Polish Central Bank, the U.S. Treasury office of Technical Assistance and others interested in advancing the practice of public finance. Leaders within these organizations understand

the powerful nature of peer consulta-tion and the positive effect that it can have in advancing the practice of public expenditure management. They believe that sustained public expenditure man-agement progress requires peer sup-port to succeed in both short and long timeframes.

while donor involvement in PEMPAL is significant, it is not the essence of the initiative. PEMPAL’s core reality can only be supplied by the practitioners who come together under its banner to learn from each other and pursue the advancement of their professional disciplines.

The only way that PEMPAL can suc-ceed is by engaging the time and atten-tion and personal efforts of the public finance professionals in the ECA Region. They must decide that the forums and visits enabled by this Initiative make it worth their personal involvement. The donors are sensitive to this reality and have made special efforts to avoid playing leading roles in PEMPAL activi-ties. Each Community of Practice must evolve its own identity and establish its own leadership.

BACKGROUND

In the spring of 2005, the world Bank ECA staff decided to bring togeth-er public expenditure management practitioners at a conference in warsaw. The objective was to focus on the activi-ties and observations of the managers responsible for public finance tasks in countries throughout the Region.

The meeting featured presentations of country case studies and personal accounts of reform activities. Deputy ministers, treasurers, budget chiefs and auditors from around the region offered their insights.

The gathering was considered a suc-cess by all involved. It was followed by discussions about how to organize public expenditure management peers into groupings based on the major pro-


3�

fessional disciplines needed to operate national finance systems. It was decided to reconvene again in warsaw in 2006 to further gauge practitioner interest in the peer learning concept. Experiencing similar positive interactions at that sec-ond conference, those involved decid-ed on a more formal and sustained approach.

Country and donor leaders identi-fied some of the powerful reasons for creating a permanent structure:

• Universal practice: Public Expenditure Management is a task per-formed in every nation. There has to be a finance ministry. There must be a way to make payments. There has to be some system for deciding which persons and institutions will receive or contribute money to the state.

• A critical subject: efficient and effective public finance is at the cen-ter of economic development policy and national stability. It is an essential requirement for any country that wants to advance economically. There is no choice but to use the tools of mod-ern public expenditure management if national leaders want to compete or even survive in the global economy.

• Effective peer learning: many pub-lic expenditure management profes-sionals are trying different approaches to their tasks as they respond to con-temporary pressures and developments. Budgeting suffers when there is no abil-ity to do multi-year estimates of spend-ing needs. Information technology has a fast evolving role in finance operations. Markets demand fiscal transparency as a price for international loans and sound debt ratings. Political leaders are not satisfied if accurate answers cannot be given about how money was spent and whether the spending had the desired results. Faced with these realities, public expenditure management professionals wanted to learn a lot more from each other. The warsaw meetings provided good opportunities to do just that. It whet the appetite of those involved for more peer learning opportunities.

out of such considerations, PEMPAL

took its current shape. Jump- started by a substantial donation from the British Department For International Development (DFID), donors formed a Steering Committee (SC) to guide the development of the PEMPAL Initiative. The SC decided to foster multiple Community of Practice’s orga-nized around the four public expendi-ture management disciplines that had shown the most participant interest. Different donors undertook sponsor-ship duties: The Bank would support the Treasury/IT and Internal Audit com-munities. U. S. Treasury signed on for the Budget Community of Practice. GTZ declared its interest in External Audit. official Community of Practice representatives would be added to the Steering Committee as the different public expenditure management disci-plines organized themselves.

Rather than hold another warsaw plenary session, each Community of Practice was invited to develop its own meetings and peer activities in later 2006 and 2007. An array of interac-tions began in various places such as Chisinau, Tbilisi, Vilnius, and Ljubljana. More and more PEMPAL interactions are also taking place virtually on the world wide web.

Examples of PEMPAL activities include:

• Benchmarking projects, such as the comparison of PEFA assessment ratings or special surveys of public expenditure management practices among partici-pating members

• Research on public expenditure management issues or practices, such as integrated financial management sys-tems, applying international accounting rules or capacity development meth-ods

• Videoconferences and telephone conference calls, which are particularly useful for setting future Community of Practice agendas, planning study visits and conducting Steering Committee business

• website development, which allows each Community of Practice to

have an electronic information base and a forum for interactions outside of physical meetings

• Events that allow joint efforts or syn-ergies among Community of Practice's, such as the next planned PEMPAL ple-nary meeting currently scheduled for the first week of February, 2008

• Small, bilateral study tours focused on well defined issues, such as capi-tal budget execution methods; project management and monitoring; or inter-nal audit techniques. Any study tour must be preceded by preliminary inter-actions between the peer participants, such as discussions at a Community of Practice meeting, videoconferences, telephone interactions or email ‘chats’.

• workshops on subjects identi-fied as priorities by each Community of Practice, such as the Program Budget workshop held by the Budget Community of Practice in Tbilisi, Georgia in late June 2007

• Continuation of successful activi-ties from previous PEMPAL interactions, such as a reciprocal study visit.

• Involvement with established pub-lic expenditure management organiza-tions, such as oECD’s Senior Budget officers, ICGFM and the Institute of Internal Auditors

• Emulating or borrowing ideas for successful peer activities from out-side the ECA Region, such as Africa’s Collaborative African Budget Reform Initiative (CABRI)

• Presentation of the PEMPAL approach, as was the case at the Miami ICGFM meeting which generated this article

Nikola Vukućević, MAAssistant to the Minister

Richard BetrolomewUS Treasury Advisor


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- Vijesti: - Journalist Milorad Milošević, - 2nd July 2007Question: How much of old foreign

currency savings was paid for the previ-ous two years in money, and how much in bonds? How many savings depositors were paid out, by now, and how many are they to be paid out?

Answer: To owners of the old foreign currency savings, which deposited their for-eign currency savings in authorised banks at the territory of the Republic of Montenegro, payment is being realised in accordance with the Law on Regulation of Liabilities and Claims on the Basis of Foreign Debt and Foreign Currency Savings of Citizens (“offi-cial gazette of the Republic of Montenegro”, No..55/03 and 11/04). on the base of the stated Law, payment of the first instalment started on 1st July 2004.

From the beginning of the payment until 30th June 2007 (first, second and third instalment) 17.430 mil. € of foreign cur-rency bonds was paid in cash. The owners of bonds decide on way of realisation of bonds of converted foreign currency savings, pur-suant to legal solutions. For stated period around 3000 depositors were fully paid, and there are about 67539 left.

Question: How many bonds (and for which amount) were realised at the capital market? How many depositors still have not taken first and second instalment in the previous period (what amount is that)?

Answer: Bonds of converted foreign cur-rency savings can be realised in the maturity period (every 1st July in the year of matu-rity) and prior to the maturity period: with redemption of bonds from funds, acquired by sale of shares of the enterprise owned by the state, by sale of the state property and

payment of the taxes to the Budget of the Republic of Montenegro.

Ministry of Finance has redeemed by now 15.989 mill € by the mentioned way of realisation of bonds of converted foreign currency savings.

Data on total realised amount of bonds at the capital market are in the Central Depository Agency.

on the base of first, second and third instalment 5.769 mill € was not drawn.

Question: Has any case of donation of old foreign currency savings been recorded in the CDA? Are you satisfied with the recent flow of this process?

Answer: Based on data of the Central Depository Agency, from the beginning of payment of the foreign currency savings, there were 200 deeds of donation with total value of 213.193,oo €.

Recent flow of realisation of bonds of converted foreign currency savings contin-ues without problem both with the own-ers of bonds and with the business bank, Central bank of Montenegro (which makes the payment of bonds), and with the Central Depository Agency and the Commission for securities.

we would like to use this opportunity to inform you that total liabilities of the Repub-lic of Montenegro based on the bonds of the converted foreign currency savings amount 137.24mill € with the repayment period until 2017. By 30.06.2007, total liabilities were reduced for 33.42 mill € - payment in cash and redeemed bonds, so that the remaining liabilities now amount 103.82 mill €.

- DAN: - Journalist, Lana Strugar - 2nd July 2007Question: Could you please comment

the unexpectedly high this-year surplus of revenues over expenditures in the treasury of Montenegro? What are the dangers caused by the large surplus and

what will Ministry of Finance do on that occasion?

Answer: Surplus of income over expen-ditures in the Budget of the Republic in 2007, is the result, on one side, of the strong development of the Montenegrin econo-my which generated higher fiscal revenues than expected, while on the other side, the result of the policy of the Government of the Republic regarding reduction of cur-rent public spending as the share in GDP. According to the estimation of the Ministry of Finance in the long term is unsustainable strong growth of the tax revenues, as it hap-pened in 2006, and first half of the 2007, so there is a caution with suggestion for spend-ing of the surplus in 2007. Namely, creation of liabilities in current public spending at the level of surplus would cause in the medium-term, when it comes to the stabilisation of the investment activities- instead of current investment boom, budgetary deficit, with all, already in theory and practice, known negative sides.

For the first time in its history Montene-gro realises in 2006 and 2007, budgetary surplus, which proves that that result was hard to reach. Achieved macroeconomic stability would be questioned very soon if the surplus would be included in the public spending, which would have further con-sequences to the economic activity and attractiveness of the country for foreign investments.

Ministry of Finance holds a view that surplus should be used for strengthening of reserves for period when it comes to the sta-bilisation or fall of the tax revenues, for debt repayment, which does not have a nega-tive effect on macroeconomic stability, for creation of the state deposit which will be necessary when the construction, with the strategic partners or independently, of capi-tal infrastructural projects in Montenegro begins, and for further reduction of tax rates, which will make the country more attractive for foreign investments.

Therefore, surplus by itself is positive under condition that it does not generate

„Questions for Ministry of Finance by Media Representatives”

Most Frequent Questions of Media and Answers for Period July-September 2007

Ana Miljanić


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additional current public spending, which in combination with the strong economic activity present now in Montenegro, could cause inflation wave and disturb the bal-ance of macroeconomic units- supply and demand of goods, services and money.

- Republika: - Journalist of Economy, Ognjen

Savić - 10th July 2007Questions: 1. Why is it that since Feb-

ruary last year no meeting was held of the successors of the financial assets and liabilities of the former SFRY and when the continuation of the division can be expected?

2. Has the stalling of the final division had negative effects for Montenegro or maybe for other states?

3. What will be discussed at this meet-ing, what remained for the states from ex SFRY to agree upon and on what will Montenegro insist?

4. Did Montenegro and Serbia finish the division of the financial assets and liabilities of the State Union and Mon-tenegro acquired about six percent from the total estate?

Answers: 1. Until the present day 16 meetings

were held of the Committee for division of the financial assets and liabilities of former SFRY and representatives of Montenegro participated at the last four. Meetings are organised on the principle of rotation of the state host, and the last meeting was held in Belgrade and the following is planned to be in Sarajevo. According to information from the organizers, authorised representatives of the Bosnia and Herzegovina in the Commit-tee, the delay of the meeting was caused by the process of constitution of the new Gov-ernment of Serbia and possible change of the authorised representative of the Repub-lic Srpska in the process of succession.

2. Most of financial assets and liabilities, according to provisions of the Agreement on Questions of Succession signed in Vienna in 2001, were divided based on the territo-rial principle i.e. applying principle of the end user, while for non allocated assets and liabilities the key determined by the Vienna Agreement is used. we should mention that the largest part of the assets and liabilities of the former SFRY was allocated before the Agreement on Questions of Succession in the direct negotiations between the states successors and international institutions (IMF, world Bank, EBRD, EIB, Paris and Lon-

don Club). Each delay most certainly does not benefit to any state successor, although there are some open issues. on the base of the process division of financial assets and liabilities until now at the account of the Ministry of Finance in Central Bank around 22,2 mill EUR were paid, including 38.477,69 ounces of gold.

3. It is left to be regulated: debt to Libya, clearing debt to former CSFR and other clearing issues, debt to Kuwait, commercial claims in Iraq, Angola and Cuba, deposits of former NBY in Swiss bank USB, foreign cur-rency savings, pensions, property issues of citizens and some smaller issues. Represent-atives of the Ministry of Finance and Central Bank of Montenegro in work of the Commit-tee participate together with the representa-tives of the Government of the Republic of Serbia and before each meeting of the Com-mittee, points of view are being coordinated on different questions, for common stand. Interest of Montenegro, and I believe of oth-er states, is the soonest possible solving of all these questions, especially of those related to debts due to international credibility of the country. Also, we must emphasise that pursuant to the Provisions of the Law on Regulation of old Foreign Currency Savings of Citizens Deposited in Authorised Banks with Headquarters outside the Republic of Montenegro (entered into force on 6th Janu-ary this year) the Republic of Montenegro keeps the right of claims on the base of paid foreign currency savings, unless it is decided otherwise in the process of succession and that amount will probably be, by current data, near 20 mill EUR.

4. Agreement between the Republic of Serbia and Republic of Montenegro on Regulation of Membership in International Financial organisations and Demarcation of Financial Rights and obligations, signed on 10th June 2006, defines principles of divi-sion between the two new countries and by provisions and annexes of the Agreement assets and liabilities are divided between Serbia and Montenegro. All financial rights and obligations which refer to the former state union Serbia and Montenegro from the succession process, and that is 38% of the total amount of the former SFRY, are divided based on determined principles between Serbia and Montenegro. Article 2 of the Agreement, determines the key for allocation of non-allocated financial rights and obligations, and based on the share in the GDP of former SRY, and that in the proportion 94,12% Republic of Serbia and 5,88% Montenegro, while, as provided by the Agreement on the Questions of the Succession, large part of other property was divided on the base of the territorial principle.

Beside the mentioned division of the financial assets and liabilities, Agreement on Questions of Succession defines division on 6 more spheres: movable and immovable property, archives, pension, other rights and obligations and private property and vested rights.

- Vijesti: - Journalist Marija Mirjačić - 18th July 2007Questions:1. Why the Law on Financial Leas-

ing does not cover supervision in that sphere?

2. Does the Ministry of Finance plans amendments of the Law in order to solve this question, since there is an increasing number of institutions dealing with leas-ing and are there requests for amend-ment of the Law in that part?

3. Does the Ministry have data on what is the total share of the leasing at the market (according to some estima-tions that figure is close to the share of some banks at the market)

Answers:Leasing market in Montenegro has been

regulatory completed by adoption of the Law on Financial Leasing („official gazette of the Republic of Montenegro”, No. 81/05 from 29. 12. 2005.) in December 2005. Beside the representatives of the Ministry of Finance, representatives of the Central Bank, USAID, Bearing Point and world Bank (SEED) also participated in the work group for drafting of the stated Law.

Main reason for adoption of the Law on Financial Leasing reflected in the need for promotion of business of financial leasing in Montenegro, as the specific credit rela-tion and its regulation with rules which will at the same time meet the requests of legal security and needs of the modern business turnover. Aiming that, the Law determines the basic framework of the business of the financial leasing, allowing the contractual parties to regulate their relations with con-sent of the will. Besides, the stated Law was evaluated as one of the most liberal and most competitive in the Europe, in sense of freedom of contracting and framework of regulation of leasing businesses. we also mention that some European countries do not have the law on financial leasing, and their business is regulated with other set of laws which regulate economic activities..

In accordance with the Law the leasing houses, or the subjects which are engaged


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in leasing are not obliged to acquire the licence for practicing of works of leasing, nor are they object of the control and supervi-sion of any authority, which is not the case with the countries in the region. we should emphasise that leasing companies do not perform their activity on the principle of “somebody else’s” funds, i.e. they are not depository institutions, nor they collect the premium, as it is the case with banks and insurance companies. owners of leasing companies take their own responsibilities and risk to clients for business of their com-panies, as any other company.

In that sense, there is no need for estab-lishment of supervision of the work of this market by any body and the Government of Montenegro has planned to relax this marked by the Law from that kind of control and enables the actors free entry and exit from the market. The control over business of leasing houses is conducted by the com-petent inspection bodies (Tax Administra-tion, Market Inspection, Inspection of the Labour Market…) which control the work and business of all economic subjects in Montenegro. At the same time, providing of the leasing services is allowed to all forms of legal persons and to natural persons.

Almost all companies which dominantly are in leasing business in Montenegro, and which are the most significant market actors, have started their business before the new Law, or immediately after the adoption of the Law. It can be concluded that the Law has promoted the legal safety and contrib-uted to the more attractive environment for leading the leasing business in Montene-gro. Although the youngest segment of the financial market in Montenegro, leasing businesses have, in a short time, gained the significant market position and recogniz-ability.

Ministry of Finance periodically col-lects data from leasing houses, according to which placements amounted 4.2% of the projected GDP for 2007. At the mar-ket there are four dominant leasing houses which record significant growth of the scope of their business. At the same time, more and more banks in Montenegro within their activity offers also the leasing services and this makes this sector more competitive. This should lead to the further improvement of services and conditions towards the users.

- Republika: - Journalist Ognjen Savić, - 31st July 2007Question: Are the journals which

are distributed free of charge exempted from the VAT and other taxes, and from which authority such a Decision can be obtained?

Answer:It is stipulated by Provisions of the Arti-

cle 3 of the Law on Value Added Tax (“official gazette of the Republic of Montenegro”, No. 65/01.....21/03, 76/05) that the VAT is paid on the turnover of products and services realised by the tax payer within his activity with compensation, and on the import of products. with provisions of the Article 24a paragraph 1 item 8) of the quoted law it is stipulated that on turnover of daily and periodical newspapers, except for the press which in the whole or in the main part includes advertisements, VAT is payable with the reduced rate of 7%.

It is stipulated by the provisions of the Article 5 of the quoted law that if the tax payer uses products which are part of his business assets and uses them for personal needs or for needs of his employees, abal-ienates them without compensation or with compensation lower than the one which would be realised at the market, or uses the for purposes which are not in the function of his activities, such usage, or abalienation is considered the turnover of the products realised with compensation.

According to that, there is an obligation of payment of the VAT for turnover of the daily and periodical newspapers and those distributed free of charge.

- Vijesti:- Journalist, Milorad Milošević - 21st August 2007 Regarding the text published in the

daily “Vijesti” on 20th August 2007, with the headline “Lukšić is being asked to take the working licences from nine audi-tors”

Answer: Regarding the letter of the director of the Institute of Accountants and Auditors of Montenegro, Mr Milan Kastratović from 16.08.2007, and which refers to the abolishment of licences to persons which are not citizens of the Republic of Montene-gro, I inform you that the Ministry of Finance pursuant to the Law on Accounting and Auditing (“official gazette of the Republic of Montenegro”, No.69/05) has formed on 17.11.2004 the Commission for Issuance of Licences for Auditors, which is checking if the person which submitted request for issu-ance of licence has met all the conditions stipulated by the Law, after which the Minis-

try of Finance brings a Decision on issuance of the licence. The Article 14 of the Law on Accounting and Auditing defines that audit-ing can be performed by the person meet-ing the following conditions:

- that he/she is a certified accountant;- that he/she has performed the activity

of audit of legal persons at least twenty-four months under the supervision of the auditor from the Article 12 paragraph 2 of the Law;

- that he/she has no criminal record which would make him/her unworthy of the activities of accounting and auditing.

At the same time, the Article 27 of the Law on Accounting and Auditing (“official gazette of the Republic of Montenegro”, No. 69/05) stipulates that the “certificate for the accountant can be acquired only by the person which acquired the profession “cer-tified accountant” in the member state or associated member of the International Fed-eration of Accountants (IFAC) or the Interna-tional Accounting Standards Board - IASB, under the condition that the programme by which the applicant has acquired personal qualifications corresponds to the training programme and passing of the exam of the competent authority“.

Pursuant to the Law on Accounting and Auditing („official gazette of the Republic of Montenegro“ No. 69/05) there are no limita-tions for non resident to have the licence of the auditor in Montenegro. In accordance with the previous, the Commission for Issu-ance of Licences for Auditors has valued the fulfilment of the conditions both of resi-dents and non residents and has adopted solutions on their issuance under the same conditions and criteria.

Also, in the letter of Mr Kastratović there are a numerous other causes because of which he demanded abolishment of issued licences from persons which are not citizens of the Republic of Montenegro. Ministry of Finance will in cooperation with other institutionns in Montenegro, and after the receiving the information from the Union of Accountants and Auditors of Serbia, Cham-ber of Authorised Auditors and other inter-nationally recognised specialised institutions for certification of auditors, will seriously consider the request of the Director of the Institute of Accountants and Auditors of Montenegro and every of stated reasons for abolishment of the licence.

I will use this opportunity to inform you that in accordance with the Law on Accounting and Auditing (“official gazette of the Republic of Montenegro” No. 69/05) Ministry of Finance has started the control of the submitted financial accounts business organisations for 2006, which they were obliged to send to the Central Register of the Commercial court by 30th June 2007. In


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the control, a special attention was given to the question of submitted reports of audit and singers of those reports. After the com-prehensive analysis and comparison of data Ministry of Finance will take measures stipu-lated by the Law.

- Balkan Insight: - Journalist Bojana Stanisic, - 22nd August 2007 Question: The Government has

expected budgetary deficit of 24,5 mill EUR for first seven months, and instead of the deficit it has three times higher surplus than in the same period last year, What caused this growth of income?

Answer: Significantly higher collection of funds based on almost all types of rev-enues of the budget is the result of several factors:

• Plan for 2007, was made based on the realisation from previous years and the planned growth of the economic activity which turned out to be underestimated when compared to the realisation, which caused the low base for comparison with the realisation for this year.

• Increased economic activities in the sphere of civil engineering, trade, tourism and transport caused the significantly higher turnover of goods and consequently to this a significantly higher collection of revenues based on VAT (increase of 28% in the period January-July 2007.)

• Increased economic activity in the mentioned areas caused the increase of the profit of the companies which reflected to the significantly higher collection of the cor-porate tax (3 times). we should emphasise that this kind of tax is the result of the eco-nomic activity in the previous year.

• Increased economic activity in the mentioned areas also caused higher collec-tion of the personal income tax (15.5 %)

• A bit lower increase is noticeable with taxes on international trade and transactions (customs 4,3%) and with revenues from excises (3,6%)

• Collection of the property tax is also increased due to the increased market price of real estates (2,79 times)

- TVCG-DNEVNIK (national television

of Montenegro-news):

- Journalist Gorica Mikić, - August 2007Regarding demands of the Union of

Associations of Pensioners for re-exami-nation of certain provisions of the Draft Law on Contributions for Obligatory Social Insurance

Answer: Inter-sector work group estab-lished the Draft Law on Contributions for obligatory Social Insurance, and reasons for the adoption of the new law are based on determination shown in the Agenda of Economic reforms of the Government of the Republic of Montenegro, to reduce the contributions for obligatory social insur-ance of employees in order to create more favourable conditions for economic devel-opment and impetus to the entrepreneur-ship. Ministry of Finance was introduced to the suggestion i.e. opinion of the Union of associations of pensioners on the Draft Law on Contributions for obligatory Insurance and the point of their attitude refers to the rate of contributions for health insurance of pensioners of 19%, which remained in the Draft, or their suggestion of reduction of that rate to 12%, stated that a higher per-centage would negatively affect the amount of pensions. Also, in the opinion a concern was stated that the repeated reduction of the rate of contributions for the pension and disability insurance from 21,6 to 20 % would endanger the solvency of the Pension and Disability Insurance Fund of the Repub-lic and with also that their material situa-tion. First of all, reduction of contributions for obligatory social insurance represents concretisation of the Tripartite Agreement signed by the Government, Independent syndicate and the Montenegrin Employers Federation, and with which the Government of the Republic of Montenegro has commit-ted itself to suggest the gradual reduction of contributions for health insurance, so that the rate of 13,5% is gradually reduced to 9%, and that the burden rate of ‘’net’’ wages by taxes and contributions in the medium-term period should go at the level of about 50%. Therefore, a following rates of contributions were suggested: for pension and disability insurance 20% (payable by the employer 8% and payable by the employee 12%) and for health insurance 9% (payable by the employer 5% and payable by the employee 4%), while the rate for the insurance of unemployment 1% (payable by the employ-er 0,5% and payable by the employee 0,5%). Association of Pensioners therefore suggests the reduction of the rate for health insurance of pensioners from 19% to 12%. Pension and Disability Insurance Fund is the obliged for calculations and payment of contributions for health insurance of pensioners, which means that the Fund on its burden, and in

favour of users of pensions pays the con-tributions usable for health protection of pensioners. Basis for calculation of the con-tributions for health insurance of pensioners represents the net pension. Since the Pen-sion and Disability Insurance Fund is obliged to pay the contributions, the reduction of contributions for health insurance of pen-sioners would not affect the height of pen-sions, since according to the Law on Pension and Disability Insurance (Article 58) pensions are harmonised with the trend of costs of life and the average salary in the Republic

It is important to emphasise that pen-sioners, as population, the largest users of the health protection in Montenegro, or that 33% of total costs of the Health Fund refer to the covering of expenses of the health pro-tection of persons which are insured on the base of pensions (pensioners and members of their households).

Association of pensioners has also noted the concern that the repeated reduction of the rate of contributions for pension and disability insurance with 21,6 to 20% will endanger the solvency of the Pension and Disability Insurance Fund of the Republic and by that also their material situation. Rate of contributions for Pension and Disability Insurance from 20% would be applied from 1st January 2010, while the reduction of the rate would continue gradually, so that for 2008, growth rate would amount 21%, for 2009 20.5%. Taking into account that the reduction of percents of the rate for pension and disability insurance is not high, it would not endangered the solvency of the Pension and Disability Insurance Fund.

Finally, we should bear in mind the fact that the reduction of the rate of contribu-tions will create more favourable business environment, what will reflect positively at the employment of new workers and increase of the gross salaries of employ-ees, positively affect the higher collection of revenues of the Pension and Disability Insurance Fund and reduction of possible deficits.

- VIJESTI: - Journalist Marija Mirjačić, - 12th September 2007Question: In which part will the new

Law on Salaries of Civil Servants and State Employees be different from the previous one?

Answer: Considering the need for addi-tional motivation of employees with special references, and increase of the living standard


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of employees in the public administration, and a good collection of public revenues and growth of nominal GDP, Government of the Republic of Montenegro has obliged the Ministry of Finance to prepare the Draft Law Amending and Supplementing Law on Sala-ries of Civil Servants and State Employees, whose drafting is in progress.

Question: One of the news will be increase of the salaries of employees in the public sector. Is it specified how much will the salaries be increased?

Answer : Increase of the salaries of employees will be different for certain pro-fessions and cannot be significantly higher than the nominal growth of the GDP in the medium term, and precise data will be known after the simulation on influence of the suggested solutions on the total macr-oeconomic trends.

Question: What is now the average salary of the civil servant?

Answer: Average net salary of the civ-il servants a for month August amounts 317,24 €.

Question: Since in the Law stands that data on salaries are open for public eye, what is the salary of the secretary in the Ministry, advisor to the Minister, dep-uty Minister, Minister, spokesperson… for comparison with the salaries on the local level.

Answer: we submit you the data on employees in the Ministry of Finance: salary of the secretary amounts 183,86 €, Advisor to the Minister from 347,32 € to 395,68 €, Deputy Minister from 453,64 € to 536,86 €, Minister 714,78 €, Spokesperson 330,49 €. we must mention that the difference in sala-ries of certain professions is shown depend-ing on the passed years of service.

Question: Beside the salaries, what are other reimbursements and other income in the public administration, will it be increased and how high are these reimbursements when compared to those in the local administration?

Answer: As for reimbursements and other personal income in the public admin-istration which refer to meals during the work, holiday cash grant, compensation for separate life and residence… the tendency is that they will remain at the same nominal level.

Question: What is the amount of the earmarked Budged for salaries of employees in some Ministry, for compari-son with the local level?

Answer: Funds for the gross salaries and contributions payable by employer planned by the Law on Budget of the Republic of Montenegro for 2007, participate with 30,84% in total expenditures, and by indi-vidual users this participation is different.

Question: How many persons from your Ministry has left job because of salary?

Answers: Six employees left Ministry of Finance for various reasons.

- Pobjeda, - Journalist Mira Milović, - 12th September 2007Question: In which way will the budg-

etary surplus be used for servicing of lia-bilities based on restitution? Do you have at this moment framework programme for way it will be done?

Answer: The new Law envisages the possibility of debt redemption. If does not influence the calculation of the budgetary surplus by itself. Adoption of all necessary decisions aiming implementation of new legal solution is underway. Also, it implies a forming of commissions, new issue of bonds, preparation of the redemption mod-el etc….

Question: Is it possible to talk in this phase about the surplus amount which will be used for these purposes? If yes, what is the amount of debt which will be serviced with this money?

Answer: It is necessary first to create a model, and activities on this plan are already in progress.

Question: What is the amount on the base of restitution now and how much will it be increased?

Answer: Until now, 845 decisions arrived in the Fund, whose total val-ue is 155.797.000,00 EUR, out of which 8.112.000,00 EUR was paid in money and in bonds 26.330.000,00, so that the current liability of the Fund amounts 121.355.000,00 EUR .

Question: How many are there citi-zens at the moment which have gained right for payment and what are the maxi-mum amounts?

Answer: Total number of former holders which gained right for compensation based on decisions of the municipal commissions for restitution and compensation is 3.813. From the total number of decisions 845, 226 decisions refer to amounts up to 25.000,00 EUR, and the largest number of decisions are these. Total value of these decisions is 2.726.000,00.

Question: Is it possible to determine which will the final amount be of the debt for restitution?

Answer: After the analysis of cases which are unprocessed yet and which will be taken

over by new regional commissions we will be able to give approximate evaluation. we hope it will be possible in few months.

Question: What are the highest indi-vidual claims based on restitution?

Answer: The highest individual decision is for the amount of 2.838.000,00 EUR. There are 26 decisions over a million.

- DAN, - Journalist Dragana Bećirović, - 17th September 2007 Questions:1. How much army property at the

territory of the Republic of Montene-gro has been sold after the regaining of independence, for how much money and where is the money invested?

2. How much army property at the territory of Montenegro was sold prior to regaining of independence, for how much money and what happened with these funds?

3. Does the privatisation of army complexes like Valdanos, also means the sale of the beach, or will they remain the property of the state?

Answers: of about 270 former “military” locations in Montenegro, not counting loca-tions at the border which were ceded to the Ministry of Interior, only 16 were sold. Two real-estates, according to the decision of the Government were taken in the share capital of the AD ‘’Plantaže’’ – Podgorica, which increased the share of the state capi-tal in this enterprise. when we use the term “army” property, we should have in mind that it refers to the property which became the property of the Republic of Montenegro and with which, in accordance with the Law on Property of the Republic of Montenegro manages the Government, which decides on the way and procedure of privatisation.

of these 16 locations, 12 was sold to the organisation of the former Fund for Reform of the Defence System of the State Union, therefore prior to gaining of independence, while 4 locations were privatised after the gaining of independence of the Republic of Montenegro.

From 12 locations which were sold prior the gaining of independence 17,3 mill. EUR were earned. Earned funds were, according to the conclusions of the Government of the Republic of Montenegro, solely used for financing of priority needs of the Army of Montenegro: social programme for redun-dancies- 4,9 mill EUR, payment of funds outstanding salaries – 5,3 mill EUR, payment of liabilities for material costs and compen-sations – 4 mill EUR, social protection of


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army insured persons – 0,5 mill EUR, con-tinuation of construction of apartments in Tivat for needs of the Army– 0,4 mill EUR, payment of military pensions - 0,7 mill EUR, while 1,4 mill EUR, according to the Law on Restitution of Expropriated Property Rights, was paid to Compensation Fund. Remaining unspent funds were paid to the Budget of the Republic.

Since the gaining of independence 4 former “military” locations were privatised, and on that occasion there was an income of about 24,8 mill EUR, from which 23,3 mill EUR refers to the privatisation of the MTRZ ‘’Sava Kovačević’’. Tenders for sale of these 4 locations were initiated in the former Fund for Reform of the Defence System of the State Union, and these tenders were ceded for realisation to the Government of the Republic of Montenegro. From earned funds, 18,3 mill EUR went to employees, for social programme, outstanding salaries and compensation instead of stocks, to Munici-pality Tivat 5 mill EUR from the privatisation of the MTRZ ‘’Sava Kovačević’’, while the rest of the earned funds was paid to the Budget of the Republic.

Question of privatisation of former “mil-itary” complexes, like “Valdanos” is under the jurisdiction of the Privatisation Council. we emphasise that the Government pre-fers long-term lease, which means that the beaches will not be privatised.

- MINA:- Journalist Angelina Filipović, - 20th September 2007Questions:1. When does the Government plan

to realise the payment of savings to citi-zens of Montenegro which invested in Dafiment and Jugoskandik bank? Will that payment encompass the depositors of Inos and Crnogorka?

2. Why these savings were not includ-ed earlier in the payment of similar lia-bilities?

3. Is the amount of this debt known, and if not, when will it be determined?

4. Will the laws, based on which deposits are being returned to foreign savings depositors, be changed for the payment of these liabilities?

5. Will the payment to depositors in the “pyramidal banks” imply the same dynamics as of the repayment of debt to depositors which have already realised their rights?

Answers:

1. By drafting of the legislations, on whose preparation works the work group formed by the Minister of Finance, possi-bilities will be created for payment of foreign currency funds of citizens which depos-ited their funds in private banks «Dafiment» and «Jugoskandik». However, «Inos – AD – Paraćin and «Crnogorka» were not regis-tered as banks, and therefore the current and suggested regulations cannot be applied to the payment to the depositors of the savings banks «Inos – AD – Paraćin and «Crnogorka» so these kinds of claims will be paid out from acquired mass of these savings banks.

2. Foreign currency funds of citizens deposited for saving in private banks could not been included in the previous pay-ment, because this question was not solved between Serbia and Montenegro. However, the Government of the Republic of Mon-tenegro the recommendation to the Minis-try of Finance to prepare the legal grounds, in order to meet requests of these citizens, or to enable in the following period the pay-ment of the funds to citizens with the resi-dence in Montenegro, whose foreign cur-rency funds are deposited in private banks for which it takes some time to provide the valid documentations.

3. Ministry of Finance has already started activities on determination of the total debt of mentioned banks to citizens of Montene-gro – by public invitation to depositors for application of claims (considering the fact that database is only in the Republic of Ser-bia) and after the application period data on total debt of these banks to citizens of Mon-tenegro will be acquired.

4. Current regulations which regulate payment of the foreign currency savings of citizens deposited in authorised banks will not be changed for payment of foreign currency funds deposited in private banks, considering that this issue will be regulated with special directive, on whose drafting, as we already mentioned, work group will work to determine the dynamics of payment of these funds.

- ANTENA M, - Journalist Predrag Tomović - 26th September 2007

Questions: Shall the increase of sala-ries of 30% for part of employed persons in the oublic sector (police, courts) lead to the growth of the inflation rate?

How will the increase of salaries affect the foreign debt (since there are

often warnings from IMF that the money should not be used for public sector but for repayment of the foreign debt)?

Answers: one of priorities of the Min-istry of Finance and the Government of the Republic is the maintenance of reached macroeconomic stability and growth of the living standard. we do not expect the increase of salaries, realised or planned, to the amount of 30% will affect the growth of the inflation rate.

• when we talk about the influence of the increase of salaries to the public debt and recommendations of the IMF that the funds should be spent to the debt repay-ment, it is important to indicate first that the Government is currently leading the policy aiming increased reduction of the foreign and domestic debt of the state. Ministry of Finance holds a view that, first of all, the surplus should be used for strengthening of reserves, or state deposits and second, that funds of the surplus should be used for debt repayment which will increase the share of public debt in GDP. Collection of fiscal duties above planned was one of the reasons for adoption of the Draft Law Amending and Supplementing Budget Law for 2007, because the conditions were created for increased realisation of certain goals from the economic policy of the Government for 2007, first of all the growth of the standard of employees in the public administration and further reduction of the public debt of the Republic in order to reach the level of 30% of GDP by 2010. Realised surplus of revenues over expenditures enabled the continuation of increase of the salaries for employees in health department, education and culture cumulatively 30%, while for other employees financed from the state budget the increase will be realised starting with the 1st January 2008. Funds for gross salaries of employees are increased for 20,2 mill EUR by the Draft Law, while the funds for debt repayment are significantly increased and amount 68,9 mil.€.

Ana MiljanićSPOKESPERSON


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September 20th 2007: Statement of the Minister of Finance Igor Lukšić, after the Session of the Govern-ment of the Republic of Montenegro regarding adoption of Information on tranche redemption of consoli-dation loan of the International Bank for Reconstruction and Development (IBRD)

...«The Government of the Republic of Montenegro will in the following two weeks come to an agreement with world Bank on all issues regarding the tech-nique of premature redemption of one or two instalments of credit tranche and in the following period, of debt repay-ment to Japan, Great Britain, Sweden, Denmark and Norway. The Government has adopted Information on tranche redemption of consolidation loan of the International Bank for Reconstruc-tion and Development (IBRD), which approximately amounts to 19 million EUR. That consolidation loan was paid on Monday. The Government, after ana-lyzing the structure of external debt and parallel budgetary savings, has decided to prematurely repay one tranche of consolidation loan to the IBRD. In 2001,

then the Federal Republic of Yugoslavia, on the occasion of regulating the mem-bership in world Bank, signed six con-solidation loans, out of which three refer to Montenegro. Tranches for the credits amount to 19,1 million EUR, 46,5 million EUR and 21,6 million EUR. with this pre-mature repayment, the amount saved in budget would be from 24,3 to 28,1 mil-lion EUR, until 2031. The premature debt repayment to Japan that amount to 300 thousands EUR, conditions would be created for complete harmonization of the relations with that country and eventually, favourable credit arrange-ments could be possible in the fol-lowing period of time. The Ministry of Finance is obliged to review, through bilateral contacts, the option of prema-ture repayment and debt restructuring that Montenegro has toward Great Brit-ain, Denmark, Norway and Sweden and that amounts to 1,1 million EUR...».

September 17th 2007: Minister of the Finance, Mr. Igor Lukšić held talks the newly appointed Ambassador of the Republic Malta, Mr. Frank Gale...

...‘During the discussion, the opin-ions on current economic and politi-cal situation were exchanged, with the emphasis on major macroeconomic trends in the past years. Minister Lukšić has informed the Ambassador on gen-eral economic indexes – inflation level, growth of gross domestic product, level of foreign investments, as well as the process of privatisation and priorities

of the Government for the following period, especially in the area of infra-structure and energy. Minister pointed out the results that the Government had achieved in development of Mon-tenegrin economic system in total and he emphasized the improvement that has been evident in the last 4 years, con-secutively. The Ambassador expressed interest for the process of joining Euro-pean Union and indicated the impor-tance of adequate preparation of pro-cedures and administration. Taking into consideration that Montenegro and Malta are small countries with very simi-lar developmental priorities, the Ambas-sador has expressed readiness to coop-erate and exchange information in the areas that are highly developed in Malta, such as tourism, education system, IT sector, banking operation …’

September 13th 2007: Statement of Minister of Finance, Mr. Igor Lukšić PhD, after the Session of the Govern-ment of the Republic of Montenegro regarding the ascertainment of the Draft Law Amending and Supple-menting Budget Law of the Republic of Montenegro for 2007 and Draft Law Amending and Supplement-ing the Law on Non-Governmental Organisations

...„Law Amending and Supple-menting the Budget Law envisages the increase of the current budget, so instead of 617 million EUR, it will amount 749 million EUR. According to estima-tions, this year revenues will amount to 750 million EUR, out of which 740 million EUR are direct revenues and the rest of it are project loans and credits. It is estimated that current expenses will increase for 30 million EUR, 20 mil-lion EUR are provided for gross earn-ings and material and services expenses are increased for approximately 7 mil-

Review of the Most Important Activities of the Minister of Finance Period July – September 2007


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lion EUR. one of planned significant increases is the increase of the transfer for social protection because it is neces-sary to start the implementation of the Programme of partial subsidy support for electricity bills to the most vulner-able households. Increase of subsidies is planned for settling the obligations assumed after the privatization of the Steel plant, transfers for funds and the biggest part of these transfers refers to the Health Insurance Fund, due to the increase of earnings in that sector. Due to the revision, for the dispute will be appropriated around 1,5 million EUR more, while the surplus of the profit realized by Agency for telecommunica-tions will be directed to the Broadcast-ing Centre. Part of the money will be also spent on beginning of the work of E-Government. Repayment of two debt instalments to the world Bank (each instalment amounts to 20 million EUR) is planned by the end of the year. we are considering the option to increase the tranche that we intend to pay out of this amount, which would further reduce the public debt. Public spending will be 47% of the gross domestic product and the public revenues would be 52%. That’s rather high, but so is the percentage of public revenues, that tells us more about unrealistically law report on GDP. In my opinion, GDP is significantly higher than its estimation … «

« …At the session, the Government has adopted the Law Amending and Supplementing the Law on Non-gov-ernmental organizations, due to the general notion that some of them are avoiding tax payment by practising eco-nomic activities that they’re not sup-posed to practise. In cooperation with non-governmental organization it was agreed that they can continue with practising economic activities, but if their annual income is more than four thousands EUR or 20% of the realized income of the previous year, they have to register the enterprise. The aim is to have NGos that truly fulfil the mission they assigned for instead of registering a NGo as coverage for tax evasion …«.

September 7th 2007: Minister of the Finance, Igor Lukšić PhD, held talks with the director of the Russian

FIS (Finance Intelligence Service), Mr. Viktor Zubkov and the director of the Administration for the prevention of money laundering, Predrag Mitrović

...„Interlocutors have expressed their satisfaction regarding the signing of the Memorandum of Understanding between the Montenegrin Administra-tion for the prevention of money laun-dering and Russian FIS, that will precisely govern the issues concerning with entire cooperation between two financial intel-ligence services and establish efficient information exchange. During the discussion, opinions on implemented economic reforms in Montenegro were exchanged as well as on overall trends in Montenegrin economy. The director of the Russian FIS, Mr. Zubkov, said the he had been informed in detail on the activ-ities of the Montenegrin Administration for prevention of money laundering and support that has been given by the Ministry of Finance to the Administra-tion in question. He also stated that the cooperation and communication with the Republic of Montenegro has been very successful, so far. The experience exchange between two Governments contributes to the goal that is governed by this Memorandum of Understanding – improved and more efficient meth-odology of processing complex cases, emphasized Mr. Zubkov. In addition, the agreement between Administration for Prevention of Money Laundering and Russian FIS on organizing the official visit of Montenegrin analysts to Moscow and Russian FIS analysts to Montenegro, for achievement of mutual improvement of those specialized services, has been favourably judged...’

September 5th 2007: Signing of the Contract with Commercial Banks, aim-ing at realization of the Project «250 housing credits»

‘Representatives of the Govern-ment of Montenegro and five Mon-tenegrin banks signed the Contract on realization of the project called “250 housing credits” that refers to

employees in public administration and Health sector. This project pro-vides for offering 200 housing credits to persons employed in public admin-istration and 50 to those employed in Health sector.

The Contract has been signed by Minister of the Finance, Mr Igor Lukšić, chairman of the Housing Commis-sion of the Governmental, Mr Suad Numanović and managing direc-tors of the following banks: Crnogor-ska komercijalna, Societe Generale (Podgorička), Hypo Alpe Adria and Prva banka, Mrs Milka Ljumović, Mr Mladen Rabrenović, Mr Christian Toeltl, Mr Velimir Bogdanović, as well as by the representative of NLB Montene-grobanka, Mr Dino Redžepagić. The Government officials have explicated that this is the continuation of the last year project during which, one thou-sand housing credits was assigned. Maximum amount of the credit has been increased from last year amount of 30 thousands EUR to 50 thousands EUR and the repayment period has been extended from 20 to 30 years. Interest rate will be seven percent, and the Republic will pay three per-cent. Minister Lukšić: “…In my estima-tion, the Government’s subvention will reach the amount of 360 thousands EUR in total, if the credits are realized to the full extent. It is very important to us to continue implementation of this project in cooperation with commer-cial banks, in order to extend the pos-sibilities of solving the housing issue, which we at the Government regard as one of the crucial objectives aiming at living standard improvement...”. Manag-ing director of Hypo Alpe Adria bank, Mr Christian Toeltl, made a statement on behalf of all commercial banks, in which he said that they are honoured and it is their pleasure to participate in such project, which, in his opinion «has a social aspect, beside the business one». «we are certain that this project has a future», said Mr Toeltl. Conditions for applying in this year project are: the length of service, lack of housing space and number of household mem-bers. The Ministries and administrative authorities are supposed to sign a Con-tract with the credit beneficiary that


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will oblige the beneficiary to stay for the certain period of time in that insti-tution in order to keep beneficiaries from quitting their job after the solving of housing issue …’

August 28th 2007: Signing of the Contract on Financing Montenegrin Sustainable Tourism Development Project (MSTDP) and the Contract on Financing the Project» Energy Community of South-East Europe APL 3 – Project for Montenegro

’ The Contracts were signed by Min-

ister of Finance, Mr Igor Lukšić and permanent representative of world Bank (wB) for Montenegro, Mr Jan-Peter olters, As well as the Mayor of Ulcinj, Mr Gzim Hajdinaga and executive director of the Regional water supply company-Montenegrin coast, Mr Zoran Bošnjak. The credit assigned for the support to the tourism sustainable development is worth ten million USD, and it will be used for financing the project of improvement in the spatial usage plan-ning and protection of delta of the river Bojana-Buna. This contract also provides for the investments into water transfer from Skadar Lake to water supply sys-tem for municipalities Bar and Ulcinj and touristic zones Velika plaža and Valdanos. Energy transfer system, imple-mentation of the power energy market liberalization programme and joining the regional market in accordance with the Agreement on forming the energy community of South-East Europe will be financed with nine million USD, which wB approved to Montenegro at the beginning of July. Montenegro has the opportunity to start with repayment of these credits in 10 years and the repay-ment period is twenty years. Minister Lukšić: “…world Bank will finance the construction of the southern extension of the regional water supply system that in accordance with Government’s

Programme should be finalized in 2010. The European Investment Bank will approve the credit for the construction of the northern extension. Arrangement regarding the energy area provides for the extremely important investments into the transfer system and improve-ment of the power-supply quality in some areas, as well as the fulfilling the needed conditions for the implementa-tion of the Agreement on energy indus-try and acquisition of the equipment for additional improvements of the Hydro-electric power plant Perućica. The sign-ing of this Contract is a big step in coop-eration with world Bank, and it fulfils conditions needed for realization of the projects from four year partnership sup-port strategy, that world Bank approved to Montenegro in June.

Mr olters said that these projects were the result of a close and constant cooperation between world Bank and Montenegro. “The main challenge in creating economic policy is to provide such surrounding that will stimulate and enable productivity increase as well as the sustainable rate of the economic growth in a medium and long term. Montenegro has a significant potential and all necessary factors needed for the upkeep of the dynamic growth rate and insured the improvement of living standard. There’s a huge potential in Montenegrin tourism that can be uti-lized well only if the existing infrastruc-ture improves and if characteristics of Montenegro, that make it attractive to the tourists, are preserved. world Bank intends to support the Government in successful making and implementa-tion of the joint approach to the man-agement of coastal areas in order to decrease degradation of the area and to support the development of the highly sustainable tourism in accordance with environment protection principles at the same time. Adequate amount of electricity power is the second factor needed for the insurance of dynamic and sustainable growth rate …”

July 26th 2007: The statement of the Minister Igor Lukšić after the ses-sion of the Government on ascertain-ment of Draft Law Amending and Supplementing Budget Law, Draft

Law on Contributions for Mandatory Social Insurance, Draft Law Amend-ing and Supplementing the Law on Capital Transfer Tax, Draft Law Amending and Supplementing Law on Value Added Tax and Report on the work of Operative team for pre-vention of illegal trade in cigarettes

„...Montenegrin Government has adopted today the Law Amending and Supplementing the Law on Capital Transfer Tax, according to which the rate of that tax will be increased from two to three percent, from next year. Minister Lukšić stated that Law Amending and Supplementing the Law on Financing of Local Self-Governments will be pre-pared soon and the structure of division of the revenues from capital transfer tax will be changed..»From the part that was designated for the budget, the 20% will be directed to the Equalisation fund. Therefore, the proportion will be 30 to 70% from now on, i.e. the larger part of revenues will be directed to Municipali-ties. According to the estimations, the budget incomes will be increased for five million euros, after the beginning of the implementation of the higher rate of the capital transfer tax.“...

The Government also adopted Law Amending and Supplementing the Law on Value Added Tax (VAT), and from now on, the lower rate (7%) will be also implemented in the area of serv-ices in marinas and for the computer equipment, in order to stimulate the development of nautical tourism and information society. »The lower rate of VAT has been implemented in the area of marina services due to the estima-tion that Montenegro could be one of the most competitive destination for the development of nautical tourism. Together with Law on Yachts, this is a good way for Montenegro to attract people interested in the development


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of nautical tourism. Lower VAT rate will be in effect until the joining of Montene-gro to Europe Union, unless it is agreed differently with European Commission. other significant amendment of the Law on Value Added Tax (VAT) is crea-tion of the legal ground for implemen-tation of so called fiscal terminals, i.e. GPS connection between the catering and retail establishments with tax cash register and Tax Administration, start-ing from next year...“. „...In accordance with the adopted Draft Law on Contri-butions for Mandatory Social Insurance, the conditions are created from next year, to gradually decrease the contribu-tions rate, until 2010. Therefore, in 2010, one EUR of earnings will be charged with 51,52 cents of taxes and contribu-tions. This will rank Montenegro among the most competitive countries in the region and wider, when it comes to this issue. Combined rate of contributions payable by the employer and employee will be, as he further explained, 30%; out of which 20% will be pension and disa-bility insurance, 9% will be health insur-ance and 1% will go to the Employment Agency. For taxi drivers, green market sellers, whose annual turnover is less than 18 thousand EUR, the contribution rate will be calculated by taking 60% of the average income for the calculation base. Thus, their tax obligations will be around 70 EUR a month, which is much more favourable than it is now. “In addi-tion, the Government adopted Draft Law Amending and Supplementing the Budget Law that creates condition for merging two Laws, which have existed simultaneously so far. »...The Law on public sector debt accumulation, in its most important provisions will become a part of the Budget Law, from now on. The significant change is that conditions for the consolidation of the budget next year are being created; therefore, the Parliament will verify the entire public spending, except the munici-pal one. In the following phase, they all be connected to the consolidated account, when the needed conditions are met, all five Republic funds will be connected to consolidated account, so instead of placing orders to the banks, they’ll be placing order to the Treasury and all payments will be done from

one place...“. At the session, the Govern-ment also adopted Report on the work of operative team for the prevention of illegal cigarettes trade for the first six months. The Report shows great effects that are above the expectation, according to the implementation of the Action plan for the prevention of illegal cigarettes trade. »...Financial effect, com-pared to the last year, is enlarged four times; revenues from the excises were less than one million EUR last year and during the first six months of this year, they have been around four million EUR. Revenues from the excises, together with VAT and customs duties amount to 5,7 million EUR. Registered legal turno-ver is 524,5 tons, and it was 274,5 last year. The registered legal turnover of the export cigarettes is tripled this year, compared to the last one. we are very satisfied with these effects, since they indicate that total revenues until the end of year could exceed the 15 million euros budgetary, and when we com-pare this with the spending estimation, it turns out that grey economy could be under 15 percent...’

July 23th 2007: Minister of Finance Igor Lukšić had a meeting with the Director and Regional Coordina-tor of the World Bank for countries in South-East Europe, Mrs Orsalija Kalancopulos -

...The mutual satisfaction regarding the opening of the office of the world Bank in Podgorica was expressed during the discussion. It was noted that this will contribute to improved realization of future projects in the field of road infra-structure, energy sources, and tourism and environment protection. The inter-locutors stated that investments are needed into local infrastructure, with necessary production of space plans in order to valorize potentials of certain areas. Minister Lukšić emphasized that policy of rational budgetary spending, together with economic development, followed by strong investment boom, results in surplus that is being used for additional reduction of taxes, with the aim of achieving long-term competi-tiveness of economic system. He also stated that the latest tax reform has been successfully realized and that the

tax revenues are being collected much better than it was planned, which con-firms that there are dynamic economic activities in Montenegro. It was also pointed to the importance of the adop-tion of the Law on Contributions for Mandatory Social Insurance, that will govern the gradual decrease of the tax and contribution on earnings in total. In Mrs Kalancopulos’s opinion, the overall economic results and indicators in Mon-tenegro are very positive; therefore, she expressed the readiness of world Bank, within the Strategy of cooperation from 2007 until 2010, to assist Montenegro in efficient realization of the capital project and aims. The mutual satisfaction was expressed regarding the forthcom-ing joint activities on improvement of economic growth. This will be accom-plished through strengthening of the private sector role and further develop-ment of institutions and legislation, that will be in accordance with international standards.

July 19th 2007: The statement of Minister of Finance Igor Lukšić, after the session of the Government of the Republic of Montenegro regarding the adoption of the Law on Games of Chance -

„... The Draft Law Amending and Supplementing Games of Chance Law limitates the number of casinos in Mon-tenegro to 14 casinos. There are 3 casi-nos in Montenegro at the moment, so there is a possibility for opening 11 more. Each Municipality in the coastal area will have one casino and taking into consideration the existing situa-tion, the Municipality of Budva will get three concessions at the most. one concession for opening a casino will be appointed to Bijelo Polje, Nikšić, Kolašin, Rožaje and Žabljak, each. The begin-ning price for a concession for run-ning casinos will be one million EUR, which means that in the adequate ten-der procedure a larger amount may be obtained. In communication with NGo sector, it was agreed that amendments and supplements should define division of the revenues from games of chance in a more precise manner. According to the existing Law, 60% of the revenues obtained from the games of chance is


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published in August 27 th 2007Journalist, Dragana Crvenicawww.vijesti.cg.yuwww.ministarstvo-finansija.vlada.cg.yu

published in September 17 thJournalist Mili Prelevićwww.cgekonomist.comwww.ministarstvo-finansija.vlada.cg.yu

published in September 2007Journalist, Vladimir Mihailovićwww.ministarstvo-finansija.vlada.cg.yu

published in September 2007www.bbc.co.uk

soon...www.ministarstvo-finansija.vlada.cg.yu

INTERVIEWS OF MINISTER OF

FINANCE, IGOR LUKŠIĆ PhD

In the period from July to September

2007.

used for realization of certain projects during the fiscal year, after the special open competition and 40% is used for the current Government activities. Now, we have defined that 75% out of these 60% will be assigned to NGo projects. Statutory regulation, that will be draft-ed, will govern the division of those 75% more precisely. This result was also achieved, among others, at the Counsel for disabled persons and we consider this revenue as a tool for improvement of functioning of those NGos. Past rev-enues from games of chance, on a monthly level, were around 400 thou-sand euros and this amount exceeds the planned one, therefore, the total of these revenues are expected to reach the amount of five million euros until the end of this year. The amendments and supplements of the Law also gov-ern the establishment of the Adminis-tration for games of chance that will be obliged to implement this Regulation. The Ministry of Finance will intensify activities on on-line monitoring of the organizers of games of chance...“.

July 12th 2007: Statement of Min-ister of Finance Igor Lukšić after the Session of the Government of Mon-tenegro, regarding the adoption of the Report on Account of Public Debt of the Republic of Montenegro, on June 30th 2007.

- At the end of June, the public debt of Montenegro amounted 768 mil-lion EUR or 35,6 percent of the gross domestic product (GDP), and the Gov-ernment expects its decrease by the end of the year. At the end of March, the public debt amounted 870,7 mil-lion EUR or 40,4 percent of GDP. The 75,3 million EUR of the debts of public enterprises were also included in that amount. Minister Lukšić : « …External debt of Montenegro is 510,1 million EUR or 23,7 percent of GDP, and the internal is 257,9 million EUR or 12 percent. The 85 percents of the external debt are inherited ones, from the past period and the biggest part of the internal

debt are liabilities resulting from the old savings and restitution, that have grown, compared to the data at the end of the last year. Liabilities for restitu-tion amounted 99,5 million EUR, in the middle of the last year. we should take into consideration that the total of the issued bonds is much higher, around 130 million EUR, but the part of it was closed through privatisation, because they were used at the market; therefore, net level of the obligations is around 96 million EUR. The debt of local self-governments has significantly grown, although some of the municipalities with high debt amount used the better realisation of the budget for repayment of the liabilities. Debt servicing at the end of the year will indicate the reduc-tion of the liabilities on this ground … ». « … The outstanding budgetary liabili-ties that in 2003 exceeded 100 million EUR, decreased at the end of the June to 3,2 million EUR. we expect the addi-tional reduction of the public debt, due to the current new tranche of the repay-ment of old savings, premature repay-ment of the debt to the world Bank and further decrease of the other debit entries. Debt servicing for old savings does not include around 20 million EUR, deposited in banks, with head offices outside Montenegro, out of which, 700 thousand EUR was paid off until now. Therefore, certain bonds could not be issued in this period of time. This will be possible after the fulfilment of some conditions, next year the latest, in order for two tranches to coincide; the one that is going on the last couple of days and the repayment of old savings under these liabilities … ».

WWW.MINISTARSTVO-FINANSIJA.CG.YUPR SERVICE

Ana Miljanić, Spokesperson

Biljana Bataković, Assistant Spokesperson


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• Press statement of Ana Miljanić, Spokesperson of the Ministry of Finance on the occasion of the premature repay-ment of the tranche of the consolidating loan of the International Bank for Recon-struction and Development (IBRD)

- Ministry of Finance has on Monday 17th September, as we planned, made the premature repayment of one tranche of the consolidating loan of the International Bank for Reconstruction and Development (IBRD) in the total amount of 18,999,771 (19 million) EUR including also the costs of the premature repayment. After the performed analysis of the structure of the foreign debt of Montenegro and comparable budget-ary savings, in accordance with the basic goal debt management, reduction of servic-ing costs, the Government of Montenegro, upon suggestion of the Ministry of Finance, decided to make the premature repayment of one tranche of the consolidating loan of the IBRD. Tranche of the loan D of IBRD which was repaid was serviced with the interest rate of 5.44%, and from 2009 with vari-able interest rate EUR Libor + 0.55% and on grounds of premature repayment the budg-etary savings will be realised until end of the repayment period 2031, to the amount of around 10,6 mill. EUR. Final goal is the reduc-tion of public debt from 35 to 30 percent of GDP, which would provide to the Govern-ment a higher credit for realisation of some of more important infrastructural projects. Let us remind you that in January 2007, Mon-

tenegro has become 185th member of the IMF and member of the world Bank Group, which created space for continuation of cooperation with these financial institutions. In accordance with that, the Government has accepted the document of Strategy on Cooperation of Montenegro with the world Bank Group, which was conceived for reach-ing strategic goals and above all:

- increase of the sustainable econom-ic growth, through increase of economic freedoms and strengthening of the role of the private sector;

- establishment of institutions and legal rules which will be in accordance with the international rules; -promotion of the liv-ing standard of citizens through adequate educational, health and social protection systems.

The Strategy defined the basic financial programme of 69 million USD, out of which 19 million USD, through the International Development Association (IDA), and 50 mil-lion USD through the International Bank for Reconstruction and Development (IBRD), in the period from 2007 until 2010. According to the Strategy, Montenegro, in cooperation with the world Bank, will realise projects from spheres: sustainable development of tour-ism, electric power industry, reform of the cadastre, promotion of the social services and help to Montenegro on its way to acces-sion to European Union.


• Realised receipts of the Budget of the Republic for period January-August 2007

Receipts of the Budget of the Republic

for August 2007, were realised to the amount of 92,456,641.74 €.

Direct revenues (including receipts from the credit repayment) of the Budget of the

Republic for August 2007, were realised to the amount of 92,395,331.68€, which is 46,54% higher than planned and 63,02 % higher when compared to the August 2006.

Structure of realised direct revenues for August 2007 is the following:

- tax revenues amount 72,959,994.29 € and are 30,01% higher than planned. Higher realisation is evident in all taxes and: in Per-sonal income tax (6,95 %), property tax (2 times), other taxes of the Republic (49,16%), Corporate tax (1,95 times) Excises (46,84%), Value added tax (29,17%) and tax on interna-tional trade and transactions (14 %),

- Revenues from duties amount 1,796,098.87 € which makes 99,84% when compared to the plan, whereas the collec-tion of revenues from stamp duties is lover for 10,95%, revenues based on court fees are 26.63 % higher than planned amount and revenues based on residence tax are 8,25% lower than planned amount,

- Revenues from compensations amount 2,556,634.93€, which makes 82,43 % of the planned amount. The highest realisation when compared to the plan on the base of compensations is realised in compensations for usage of goods of common interest (5,34 times). Higher realisation of revenues when compared to plan based on compensa-tions is evident in ecological compensations (31,61%), compensations for organizing of games on chance (15,47%) and in compen-sations for roads (7,15%). Realisation is lower in compensations for usage of natural goods, and it amounts 73,53% of planned amount.

- other revenues of the Republic amount 14,849,687.49 €, which is 9,44 times higher than planned amount Increase of other rev-enues of the Republic is the result of col-lected yields on capital to the amount of 12,591,256.05 €, which were not planned in the budget for 2007. Receipts of the Budget of the Republic for period January-August amount 510,076,710.47€.

Direct revenues of the Budget of the Republic for period January-August 2007 amount 504,413,453.67€ and are 30,0 % higher than planned and 43,71% higher than realisation in the same period last year.

Info/Review of Other News for Period July - September 2007


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Structure of direct revenues of the Budg-et of the Republic in this period is following:

- Revenues based on taxes amount 446,047,985.36€ and are 28,1 % higher than planned. Higher realisation when compared to the plan is evident in all types of taxes. In property tax the realisation is 2,6 times higher than planned amount, and in profit tax 2,9 times higher than planned.

- Revenues from duties amount 12,290,968.48 €, which is 5,9% lower than planned amount (lower collection of stamp duties when compared to the planned amount - Revenues from compensations amount 14,518,149.02 €, which is 8,7 % higher than planned amount. Higher realisation when compared to the plan is evident in all com-pensations except in compensations for usage of natural goods where realisation is 50% of the plan and compensation for roads where the realisation is 92,9 % when com-pared to the plan.

- other revenues of the Republic amount 28,038,784.07 €, which is 2,74 times the planned amount. This increase is caused by the collected yields on capital to the amount of 13,960,256.05 €, which were not planned by the budget for 2007, and by higher col-lection of other revenues when compared to planned (74,9%). Revenues made by authori-ties and their activities amount 95,9% of the planned amount.


• Realised receipts of the Budget of the Republic for period January – July 2007

– Receipts of the Budget of the Republic for July 2007, were realised to the amount of 70,232,348.95 €. Direct revenues (including receipts from the credit repayment) of the Budget of the Republic for July 2007, were realised to the amount of 70,212,634.42€, which is 25.40 % higher than planned and 38.44 % higher than in July 2006. Structure of realised direct revenues for July 2007 is the following: - revenues from taxes amount 64,367,729.33 € and are 27.71% higher than planned. Higher realisation than planned is evident in almost all taxes and in: Personal Income Tax (11.90 %), Property tax (2.83 times), and in other revenues of the Republic (47.38%), in corporate tax (2.54 times) Excis-es (15.55%), Value added tax (30.03%) and tax on international trade and transactions (13.60 %), - revenues from duties amount 1,876,954.83 € which is 13.37% higher than planned, whereas the collection of revenues from stamp duties is 10.97% higher, rev-enues based on court fees 14.36 % higher than planned amount and revenues from residence tax 30.46% higher than planned amount,

- Revenues from compensations amount

2,006,539.98 €, which is 97.98 % of the planned amount. Higher realisation of rev-enues when compared to the plan on the base of compensations is evident in almost all types of compensations and the largest is in collection of compensation for usage of goods of common interest (5.49 times). Realisation is only lower in compensations for roads 86.70% of the planned amount- other revenues of the Republic amount 1,722,142.49 €, which is 20.75 % higher than planned amount.

Receipts of the Budget of the Repub-lic for period January-July 2007, amount 415,545,620.76€. Direct revenues of the Budget of the Republic for period January-July 2007, amount 410,124,101.63 € and are 26.0 % higher than planned and 39,24 % higher than realisation in the same period last year. Structure of the direct revenues of the Budget of the Republic in this period is the following: - revenues from taxes amount 373.087.991,07€ and are 27.7 % higher than planned. Higher realisation when compared to the plan is evident in all types of taxes. In property tax the realisation is 3.01 times the planned amount;

- revenues from duties amount 10,494,869.61 €, which is 7.8 % lower than the planned amount (lower collection of stamp duties when compared to the planned amount); - revenues from compensations amount 11,961,514.09 €, which is 16,6 % high-er than planned amount. Higher realisation when compared to the plan is evident in all types of compensations except in compensa-tions for usage of natural goods where reali-sation is 90,3 % when compared to the plan; - other revenues of the Republic amount 12,428,643.44 €, which is 43,8 % higher than the planned amount, and is caused by the larger level of realised other revenues when compared to planned. Revenues from authorities and their activities amount 99.4% of the planned amount.


• Bulletin of the Ministry of Finance No 8 was Published

• Information on the progress of pay-ment of foreign currency savings

- Payment of old foreign currency sav-ings of citizens, deposited in foreign currency accounts and foreign savings deposit books with authorised banks with headquarters at the territory of the Republic, and of foreign currency savings of citizens with residence in the Republic, which deposited their foreign currency savings in authorised banks with headquarters outside the Republic of Mon-tenegro. For holders of foreign currency sav-ings bonds, which were acquired in accord-ance with the Law on Regulation of Liabilities and Claims on the Basis of Foreign Debt and Foreign Currency Savings of Citizens (“offi-cial gazette of the Republic of Montenegro”, No.55/03 and 11/04), payment of fourth instalment started on 2nd July 2007. Pay-ment of foreign currency bonds is performed through business banks, and regional centres of the Central Bank of Montenegro.

Foreign currency savings depositors, i.e. citizens which registered themselves in the Central Depositary Agency as holders of for-eign currency savings bonds, can draw the fourth instalment in regional centres of the Central Bank of Montenegro and Atlasmont-banka AD Podgorica branch office Pljevlja, depending on their place of residence, based on their identification document (identity card, passport).

Holders of foreign currency savings, which haven’t drawn the first instalment, should go to the window of the bank where they deposited their savings. Former sav-ings depositors of Montenegrobanka AD Podgorica and Jugobanka AD Podgorica in bankruptcy, should report to the appropriate window of the Central Bank of Montenegro.

Legal persons, which acquired bonds on the basis of foreign currency savings by purchase of the bonds at the stock exchange, can draw instalment oBo7 at the window of PRVA BANKA CRNE GoRE.

From the beginning of the payment of the fourth instalment, through windows of banks and regional centres of the Central Bank of Montenegro, 3.559.776,98 €, i.e. 2635 of holders of foreign currency savings bonds were paid off, out of which the first time 60 holders of foreign currency savings came for the first time and to them 62.195,00 € was paid.

obligation of the Republic of Montene-gro on the grounds of payment of foreign currency savings of citizens, which acquired their right in accordance with the Law on Regulation of Liabilities and Claims on the Basis of Foreign Debt and Foreign Currency Savings of Citizens amounts 137,2 mil.€, by now 37,0 mil € was paid ( in cash 21,0 mil-lion and redeemed 16,0 mil.€ of bonds), so that now foreign debt on the base of foreign


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currency savings of citizens amounts 100,2 mil.€

Debt on the basis of foreign currency savings becomes mature:

- 01.07.2004, - 388,00 € per savings deposit;

- 01.07.2005, - 530,00 € per savings deposit.

Payment of remaining amount of the foreign currency savings is divided into 12 annual instalments, which become mature each 1st July until 2017, but the annual instalment for payment cannot be less than 500,00 €.

Foreign currency savings bonds can be realised before the mature period for:

- Purchase of shares of public enterprises and enterprises owned by funds in the priva-tisation process;

- Purchase of apartments, residential rooms, business areas, land or other property owned by the state, for which the Republic decides that can be bought with bonds which are not due for payment;

- Payment of tax liabilities with bonds which are due in the year to which tax liabil-ity refers.

Since 10th April 2007, through business units of Crnogorska komercijalna banka AD Podgorica, payment is being realised of for-eign currency savings of citizens with resi-dence in the Republic of Montenegro, which do not realise that right by laws of the coun-try in which the headquarter of the author-ised bank is. way, deadline and procedure of payment of foreign currency savings of citizens with residence in the Republic, is stipulated by the Law on Payment of Foreign Currency Savings of Citizens Deposited with Authorised Banks with Headquarters outside the Republic of Montenegro (“official gazette of the Republic of Montenegro”, No. 81/06) and Guidelines on way of Realisation of Pay-ment of Foreign Currency Savings of Citizens with Authorised Banks with Headquarters outside the Republic of Montenegro(“official gazette of the Republic of Montenegro”, No. 20/07).

In order to realise the payment of for-eign currency savings with claims for pay-ment of foreign currency savings, a foreign savings deposit book should be submitted, foreign currency account with proof of bal-ance of parent bank and proof of residence. Submitting of claims for payment of foreign currency savings is done until 6th January 2008, through business units of Crnogorska komercijalna banka AD Podgorica.

. Payment of foreign currency savings in accordance with the Law on Payment of For-eign Currency Savings of Citizens Deposited with Authorised Banks with Headquarters

outside the Republic of Montenegro will be realised by following rate:

- First instalment, to the amount of 380,00 € per savings deposit will be paid 90 days from the entering into force of the Law (payment started on 10. 04.2007),

- Second instalment, to the amount of 530,00 € per savings deposit, will be paid from 1st July 2008.

Payment of the remaining amount of the foreign currency savings will be realised in nine annual instalments which become due every 1st July in the period from 2009 until 2017, but the annual instalment cannot be less than 500,00 €.

Foreign currency savings bonds can be realised prior to maturity period for:

- Purchase of shares of public enterprises and enterprises owned by funds in the priva-tisation process;

- Purchase of apartments, residential rooms, business areas, land or other property owned by the state, for which the Republic decides that can be bought with bonds which are not due for payment;

- Payment of tax liabilities with bonds which are due in the year to which tax liabil-ity refers.

Based on the Public invitation for apply-ing for filing of holders of foreign currency savings of citizens with residence in the Republic, which deposited their foreign cur-rency savings with authorised banks outside the Republic, around 7000 holders of foreign currency savings have reported to the Minis-try of Finance with total value of foreign cur-rency savings of around 19,8 mil.€.

By now, the first instalment was drawn by 2522 holders of foreign currency savings, and to them was paid 889.907,93 €.

on the grounds of recent applying and payments, citizens with residence in the Republic of Montenegro have deposited for-eign currency savings with authorised banks whose headquarters are in Slovenia, Croatia, Bosnia and Herzegovina and Serbia.


• Press statement of the Operative team for fight against the illegal trade in cigarettes

Thanks to the synchronised activities of the competent bodies from the operative team, in the previous period very impres-sive results were achieved on prevention of the illegal trade in cigarettes. Legal turno-ver of cigarettes at the domestic market is being significantly increased, so that the sale of imported cigarettes in the period January- June this year is three times higher, from 118,5 in 2006 to 368,5 tons in 2007. Budgetary revenues from excises on the

imported cigarettes are significantly increased, in the first half of 2006 amounted 965.268,89 EUR, and in the same period 2007, 3.988.039,73 EUR. Also, according to the records of the Agency for Tobacco, the number of registered merchants which are in retail sale of cigarettes is continuously growing.

Legalisation of the cigarettes market is becoming specially attractive for world known companies in the production of ciga-rettes, like Philippe Morris, which recently acquired the licence of the wholesaler in cigarettes, and the arrival of several other leading producers and tobacco brands is expected. with the development of the ciga-rettes market and strengthening of the com-petition among the participants, European standards are gradually being established in this activity. operative team has continued in the previous period with activities on the plan of control and achieved results indicate the significant reduction of the illegal trade both on public surfaces and in legal retail objects. operative team has noted that at the begin-ning of the main tourisms season the risk of illegal trade in cigarettes is being increased in the coastal municipalities and has indi-cated the necessity for emphasising of the higher controls in cooperation with the local self-governments in municipalities which are recognised by illegal turnover which can endanger current results in prevention of this phenomenon.


PR SERvICE


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Public Debt of the Republic of Montenegro, without public enter-prises, at the end of the third quar-

ter of 2007 amounts 773 mill EUR or 35,9% of the Gross domestic product (GDP). Internal debt amounts 272,4 mill EUR or 12,7% of GDP, while foreign debt amounts 506,6 mill EUR or 23,2% of the GDP.

In the foreign debt in the previous quarter there has been a reduction of total liability for 9,5 mill EUR, due to the repay-ment of one tranche of the consolidation loan of the International Bank for Relief and Development (IBRD) to the amount of 18,999,771 EUR including costs for premature repayments. Account of debt in International Development Association, Kreditanstalt für wiederaufbau - Germany - Kfw, Hungarian and Polish credits is higher for the drawings in the previous

three months, while the first drawing of funds from the credit of the Societe Generale Bank was performed for the procurement of the IT equipment for schools.

Draft Law Amending and Supplementing the Budget Law for 2007, stipulates the repayment of one more tranche of the consolidation loan to IBRD, and depending on the income trend the account of debt on this ground will be reduced for additional 1 to 2% of the GDP. Budgetary savings based on already redeemed tranche amount around 800,000 EUR per year, or around 10,6 mill. EUR in total until the end of the amortisa-tion period, and in the case of additional redemption savings would be from 1,3 mill. EUR to 3,1 mill. EUR per year or in total amount from 11 mill. EUR to 28 mill.

Also, a one-off repayment of the liabilities to creditors from Paris donors club is planned, whose claims are less than 1 mill SDR, and in accordance with provisions of the Adjusted Minutes on Consolidation of Debt of the Federal Republic of Yugoslavia, signed on 28th December 2001. Furthermore, in the fol-lowing period one-off repayment will be realised to the Ministry of Economy and Trade of Japan within the Paris Club and signing of the bilateral agreement with Germany. Agreement with Germany provides the possibility of debt writeoff to Kfw, or debt swap for certain project, to the amount of 13 mill. EUR, which would additionally reduce foreign liabilities.

During 2007, agreements were signed and first drawings of the credit funds are expected, relating to the realisation of the following projects: Regional water Supply System with the world Bank (IDA conditions) to the amount of around 10 mill USD, Energetics with the world Bank to the amount of around 8 mill. USD and project from the sphere of energet-ics with Kfw to the amount of 5,4 mill. EUR. Contracts with EBRD for the Project on Railway Infrastructure to the amount of 6 mill EUR, Regional water Supply to the amount of 8 mill. EUR and phase III Project on waste waters with Kfw to the amount of 4,5 mill. EUR are in the process of harmonisation. In arrangement with the world Bank and Kfw for the Project on waste waters, where the Republic of Montenegro is a borrower, relations between the Republic of Montenegro and beneficiaries, Electric Power Industry, Public Enterprise Regional water Supply and Municipality Ulcinj will be defined by the special agreement. In other arrange-ments the Republic of Montenegro is a guarantee for regular payment of liabili-ties.

Also, signing of the agreements is expected for the projects of EIB from the

Public Debt of the Republic of Montenegro - 30th September, 2007

Account and Changes in PublicDebt of the Republic of Montenegro in the Third Quarter of 2007


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arrangements signed during Serbia and Montenegro, which referred to the EIB projects in Montenegro. Namely, 13 mill. EUR remained undrawn, for projects from the sphere of roads 4 mill. EUR, recon-struction of airports 1 mill. EUR, waste waters 5 mill. EUR and energetics 3 mill. EUR, and these funds will most likely be e employed with special contracts or amendments to the existing ones.

As for the outstanding debt issues, fol-lowing should be regulated in the forth-coming period: debt to Governments of Libya, opened negotiations, and Kuwait, clearing debt of SFRY to Czech Republic and Slovakia, first round of negotiations was made, and debt based on API bonds (Alternative Participation Instruments) within the London Club of Creditors. Debt to governments of these four countries become Montenegrin on the base of allocation of non-allocated debt (5,88% of 38% for Serbia and Montenegro), and exact amount of debt and way of rescheduling will be determined during negotiations. As for the API bonds it is aimed at finding of possibility for bilateral solution of this issue, because the credi-tor, the UBS bank, until recently insisted on multilateral framework for solution.

Data stated in the table 1 indicate gross public debt of the Republic of Montenegro without public enterprises, while in claims the most significant is the debt of the Russian Federation to the Republic of Montenegro to the amount of 18 mill USD, agreement was signed on 27th of April, and inflow of unblocked funds from the succession process to the amount of around 2,5 mill USD. Also, in the net indebtedness should be con-sidered also state of the deposit of the Ministry of Finance which together with funds amount on 31st August 2007, about 203 mill. EUR, including also 38.477,689 of

ounces of gold.In the internal debt in the last quarter

call in arrears of the budget from were paid in total while T-bills were redeemed in total. In the old foreign currency sav-ings payment of the fourth instalment has started and the debt was reduced for 6 mill. EUR, while the payment of sav-ings of citizens deposited in authorised banks with headquarters outside the Republic of Montenegro is being realised in Montenegro and by now around 1,1 mill. EUR has been paid.

Liabilities on ground of restitution is increased for 25,5 mill. EUR in the last three months, until now absolute decrees were enacted to the amount of 155,8 mill. EUR out of which 8,1 mill EUR was paid in cash and 26,33 mill. EUR of bonds were redeemed.

Public debt of the Republic of Montenegro, with public enterprises amounts 865,9 mill. EUR or around 40,2% GDP on 30th September 2007. Public enterprises which are beneficiaries of foreign credits, for which Montenegro has given guarantee or counter-guaran-tee, Monteput, Airports of Montenegro, Electric Power Industry of Montenegro and Agency for Flight Control are enter-prises with autonomous income, and there is reasonable assumption that the stated enterprises will service their liabili-ties regularly, so according the ESA 95 accounting method these liabilities were not included in the public debt, but are treated as the debt of the public sec-tor. Namely, according to the terminol-ogy ESA-95, only the general government sector debt is observed, while the gen-eral government sector includes all units which produce for individual and collec-tive spending and are mostly financed from paying of other units, basically of those that participate in the division of

national income. Government sector, according to ESA-95 encompasses four sub sectors: central Government, govern-ment of countries or regions (if they exist), local governments and social funds, and their debt is according to definition con-sidered to be the Government debt. The Protocol from the Maastricht Contract on European Union, 1992, defines total debt of the government as gross debt account on nominal value at the end of the fiscal year, consolidated between sectors of the Government.

In the existing regulatory rules, the Law on Borrowing and Debt Management of the Public Sector, includes in the debt of public sector besides the three men-tioned sub-sectors also the debt of public enterprises, while the Provision of the new Draft Law on Budget defines the term national in accordance with the terminol-ogy of ESA-95. The new general law on budget will in a simpler way regulate the borrowing procedure of the Republic of Montenegro, issuance of guarantees and public debt management. Also, drafting of the Strategy for public debt manage-ment for the following three-year period is in progress, which will define basic guidelines for borrowing, i.e. the borrow-ing programme, projection of public debt trend and sustainability. The Strategy for period 2007-2009 will also introduce the basic guidelines for cash management of the Ministry of Finance and neces-sary infrastructure for anticipation of cash inflows and outflows. .

Evaluation and sustainability of the public debt

Table 2. Height and structure of the public debt of Montenegro in period 2002 - September 2007

As it can be seen in the Table 2., level of public debt was reduced 88,3% in 2002, to 35,9% on 30th September 2007. Reduction of foreign public debt from 68,7% to 23,2% of GDP is of special importance. The reduction occurred due to the restructuring and write-off of the debt within the Paris club, including the second write-off in February 2006, with the total amount of 66% of the nominal amount, and rescheduling to IFC and IBRD.

Foreign debt will most likely keep the falling trend during the next 12 months due to the premature repayments (2% of GDP) and regular capital amount repay-ments (0,5% of GDP), while there will be new drawings to the amount of around


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1,5% of GDP.Largest share of the foreign debt,

around 84%, is the debt from the period of SFRY, and was assumed by the Law on Regulation of Liabilities and Claims Based on Foreign Debt and old Foreign Currency Savings, while even 80% of the domestic debt, primarily liabilities based on old foreign currency savings and res-titution, «inherited» on the grounds of liabilities from the period of SFRY.

Internal debt, after the tendency of fall especially during 2005 and 2006, has a trend of growth during 2007, primarily because of growth of debt on the basis of enforceable decisions of commissions of municipalities on the grounds of res-titution and updating of data on debt of municipalities.

In evaluation of public debt sustain-ability, according to the methodology used by the world Bank, but only for sus-tainability of foreign debt, Montenegro can be classified as low indebted country. Namely, with both criteria, relation of NPV (although the amount is not explicitly determined, does not change significant-ly percents shown here) and GDP (over 80% of countries is highly indebted, 48%-80% moderately indebted and less than 48% is low indebted) relation of NPV pub-lic debt and export of goods and services (over 220% - highly indebted, 132%-220% moderately indebted and under 132% of low indebted), Montenegro is in catego-ry of low indebted economies. Data for Montenegro for the first criterion is 35,9%, and for the second 83% (according to data of the Central Bank of Montenegro export of goods and services in 2006, was 948 mill EUR without remittances, which also enter the account by methodology of world Bank). Also in the third, widely used criterion, relation of public debt and budgetary revenues, for Montenegro that ratio amounts about 130%, which indi-cates that Montenegro has sustainable debt position.

with liquidity, or possibility of regular service of liabilities on the base of pub-lic debt, relation between total service of debt and export of goods and ser-vices in 2006, was under 10%, which is significantly under critical value of 30%. During 2006, liabilities based on service were around 90 mill EUR while in 2005 they were about 125 mill EUR, including service of old foreign currency savings and restitution, and that, with the same income based on export of goods and

services significantly reduces ratio of ser-vice of liabilities. other liquidity ratio, rela-tion of interest and total export of goods and services in 2006 is 2,2%.

From other relevant indicators, rela-tion between serviced liabilities (interests and capital amounts) and GDP was 5% in 2006, while relation between debt ser-vice and budgetary revenues was 16%, and these indicators have recorded fall in last couple of years. For first indicator the amount of about 2% is expected, and for second under 10% until 2009. Indicators of liquidity, although very static, as more-over other indebtedness indicators, serve as good instruments for indicators of reg-ular service of liabilities of the country.

Due to the growth of budgetary rev-enues and export of goods and services during 2007, and even to the smaller obli-gations of debt service in 2007, ratios of liquidity will be more favourable.

For comparison of the share of the debt in GDP, we should mention that for example in 27 countries of European Union in 2006, that percentage amount-ed 61,7%, while for 13 countries of Euro Zone it amounted even 69%. It is inter-esting that new member countries (10 countries which become EU members in 2004, and Bulgaria and Romania) have average, non - pondered, of about 35% of the share in GDP. Baltic countries have the lowest percentage participation (Estonia even 4,4%), while on the other hand Italy and Greece have over 100% participation of the public debt in GDP. It is also spe-cific that, except for Malta and Cyprus all small countries have participation to 30%, and that is in the lights of sustainability of debt very important, because smaller sys-tems, especially without possibility to for issuance of own currency, are less flexible regarding servicing of liabilities based on foreign debt.

Determining of the level of public debt as non-sustainable is problematic and it depends from the country (level of industrialisation, diversification of econ-omy, fiscal flexibility etc.). According to researches, in 55% of cases, public debt in the year before ceasing of dept servicing was at the level lover than 60% of GDP, while in 35% of cases share of the debt in GDP was lower than 40%.

Average public debt level in the devel-oping countries, in the year before ceas-ing of debt repayment (default), amount-ed about 50% of GDP. Furthermore, debt crises were often from the 19th Century

until the beginning of the world war II, when in average to ten countries per year announced defaults, and for example

in ‘30-ies and ‘40-ies of the last Centu-ry during the great depression even over 15 countries per year. From that period follows great fall of debt crises, only few countries per year and only at the begin-ning of ‘90-ies defaults on bank credits are somewhat more often.

Regarding relation between foreign and internal debt developed countries have almost the same share in the total debt, while in developing countries that ratio is 3:1 in favour of foreign debt, and the main reason for that is the level of development of the domestic capital market. Anyway, term internal debt is related mostly to the liabilities of servic-ing in domestic currency, and in that case the country has more possibilities on the occasion of servicing of these liabilities, mostly by issuance of money or increase of tax rates. In Montenegro, share of inter-nal debt in the total debt is 35,4 %, and has tendency of growth due to liabilities based on restitution, but due to relatively long maturity period and low interest, even though it is serviced in EURo, it is considered to be sustainable.

Nemanja Pavličić,Coordinator of the Department

for Public Debt Management, Indebtedness Analysis,

Cash Management and International Relations


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I REALISATION OF INCOME

Total realised budgetary revenues of all municipalities for period January-June 2007 amount 119,1 mill € (average per month 19,85 mill €). In the structure of realised revenues, local revenues have share of 83,30%, assigned revenues of the Republic 12,84 %, assets of the Equalisation fund 3,07 % and subsidies from the Budget of the Republic 0,79 %.

In the following table a preview of realised budgetary revenues of municipalities for the period January-June 2007, by sources: in €

ordinal Municipalities Local revenuesAssigned revenues

Equalisation fund

Subsidies from the Budget of the Republic

Total(3 to 6)

%

1 2 3 4 5 6 7 81. Andrijevica 511,213 26,447 125,411 663,071 0.562. Bar 6,513,911 1,284,587 63,245 8,635 7,870,378 6.61 3. Berane 1,242,767 164,038 511,046 21,661 1,939,512 1.63 4. Bijelo Polje 1,563,166 294,048 682,604 2,539,818 2.13 5. Budva 18,311,363 3,172,321 55,339 21,539,023 18.09 6. Danilovgrad 1,485,210 184,269 319,817 1,989,296 1.67 7. Žabljak 203,522 127,513 74,385 30,000 435,420 0.37 8. Kolašin 1,488,916 175,611 85,524 1,750,051 1.47 9. Kotor 14,882,231 1,278,704 39,888 428,338 16,629,161 13.96 10. Mojkovac 319,532 39,871 191,890 551,293 0.46 11. Nikšić 6,201,694 1,509,415 320,006 8,031,115 6.74 12. Plav 211,403 89,501 201,327 4,634 506,865 0.43 13. Plužine 337,459 213,166 46,715 597,340 0.50 14. Pljevlja 3,362,951 339,061 109,241 3,811,253 3.20 15. Podgorica 31,650,019 3,575,447 49,230 35,274,696 29.62 16. Rožaje 1,773,400 354,439 291,556 2,419,395 2.03 17. Tivat 2,119,341 637,158 12,218 2,768,717 2.32 18. Ulcinj 931,604 273,466 217,096 16,000 1,438,166 1.21 19. Herceg Novi 5,110,677 1,323,927 10,421 56,431 6,501,456 5.46 20. Cetinje 867,121 220,735 154,221 326,883 1,568,960 1.32 21. Šavnik 118,370 8,745 87,680 49,730 264,525 0.22 ToTAL 99,205,870 15,292,469 3,648,860 942,312 119,089,511 100.00 % 83.30 12.84 3.07 0.79 100.00

1. Local Budgetary Revenues of Municipalities

Total realised local revenues of budgets of all municipalities for period January-June 2007, amount 99,2 mill €, out of which fiscal revenues (taxes, duties, compensations etc.) are 54,91 %, and other revenues (capital transfer revenues, revenues realised by municipal bodies and services with their activities, donations, loans and funds transferred from previous year) 45,09%.

Realised local fiscal revenues of municipalities for reporting period amount 54,5 mil.€ (average for month 9,08 mill €). In the structure of revenues on that basis, the largest share refers to compensation for arrangement of building land (54,44 %),surtax of the personal income tax (11,18 %) and revenues from compensations for usage of the construction land (9,71%) to which 75,33% of the budgetary revenues refer.

Municipalities realised 44,7 mill € (average for month 7,45 mill €) on the base of other local revenues (capital transfer revenues, revenues realised by municipal bodies and services with their activities, donations, loans and funds transferred from previous year) for reporting period. In the structure of revenues on that basis, the largest share refers to capital transfer tax (58,12 %) .

Realisation of Public Spending at the Local Level Period January - June 2007


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In the following table an overview of realised local (direct) budgetary revenues of municipalities for period January-June 2007, by sources: in €

ordinal number Municipality Fiscal revenuesother local revenues

Total (3+4) %

1 2 3 4 5 61 Andrijevica 95,159 416,054 511,213 0.522 Bar 3,755,865 2,758,046 6,513,911 6.573 Berane 515,204 727,563 1,242,767 1.254 Bijelo Polje 1,171,344 391,822 1,563,166 1.585 Budva 8,772,477 9,538,886 18,311,363 18.466 Danilovgrad 439,318 1,045,892 1,485,210 1.507 Žabljak 90,853 112,669 203,522 0.208 Kolašin 813,246 675,670 1,488,916 1.509 Kotor 8,325,340 6,556,891 14,882,231 15.0010 Mojkovac 183,015 136,517 319,532 0.3211 Nikšić 3,751,891 2,449,803 6,201,694 6.2512 Plav 158,072 53,331 211,403 0.2113 Plužine 274,628 62,831 337,459 0.3414 Pljevlja 2,913,821 449,130 3,362,951 3.3915 Podgorica 16,094,874 15,555,145 31,650,019 31.9016 Rožaje 565,151 1,208,249 1,773,400 1.7917 Tivat 1,148,516 970,825 2,119,341 2.1418 Ulcinj 893,349 38,255 931,604 0.9419 Herceg Novi 3,930,590 1,180,087 5,110,677 5.1520 Cetinje 495,983 371,138 867,121 0.8721 Šavnik 82,762 35,608 118,370 0.12 ToTAL 54,471,458 44,734,412 99,205,870 100.00 % 54.91 45.09 100.00

2. Assigned Revenues of the Republic

To the budgets of municipalities (21) from common revenues for period January-June 2007, 15,3 mil. € (average per month 2,55 mill €) was assigned. In the structure of assigned revenues, personal income tax has a share of 33,65 %, capital transfer tax 53,78 %, concession compensation for usage of natural goods 8,59 % and annual compensation for registration of road motor vehicles, tractors and trailers 3,98 %.

In the following table overview is given of assigned revenues of the Republic to municipalities for period January-June 2007, by types of revenues:

u €

ordinal number MunicipalityPersonal income tax

Capital transfer tax

Concession compensation for usage of natural goods

Annual compensation for registration of motor vehicles

Total(3 to 6)

Structure

1 2 3 4 5 6 7 81 Andrijevica 10,642 725 9,349 5,731 26,447 0.17 2 Bar 277,499 965,708 41,380 1,284,587 8.40 3 Berane 88,952 23,684 12,675 38,727 164,038 1.07 4 Bijelo Polje 119,745 111,387 1,360 61,556 294,048 1.92 5 Budva 231,852 2,922,410 18,059 3,172,321 20.74 6 Danilovgrad 73,570 93,315 3,166 14,218 184,269 1.21 7 Žabljak 14,290 111,361 1,862 127,513 0.83 8 Kolašin 41,707 110,593 13,570 9,741 175,611 1.15 9 Kotor 482,283 794,924 1,497 1,278,704 8.36 10 Mojkovac 36,699 240 1,000 1,932 39,871 0.26 11 Nikšić 869,942 145,258 424,115 70,100 1,509,415 9.87 12 Plav 48,369 5,784 28,896 6,452 89,501 0.59 13 Plužine 30,999 181,333 834 213,166 1.39 14 Pljevlja 197,766 14,525 93,796 32,974 339,061 2.22 15 Podgorica 2,033,510 1,035,908 272,306 233,723 3,575,447 23.38 16 Rožaje 39,993 82,939 166,688 64,819 354,439 2.32 17 Tivat 108,322 518,913 9,923 637,158 4.17 18 Ulcinj 58,667 206,082 8,717 273,466 1.79 19 Herceg Novi 235,857 1,033,162 10,431 44,477 1,323,927 8.66 20 Cetinje 137,239 47,112 13,660 22,724 220,735 1.44 21 Šavnik 7,969 776 8,745 0.06 ToTAL 5,145,872 8,224,030 1,313,783 608,784 15,292,469 100.00 Share 33.65 53.78 8.59 3.98 100.00


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3. Equalisation Fund

From Equalisation Fund 3,6 mill € was assigned to municipalities in period January-June 2007,(based on equalisation subsidies 3,24 mill € and based on incentive subsidies 0,36 mill €). Largest share in allocated funds on the stated base refers to municipalities: Bijelo Polje, Berane, Danilovgrad, Nikšić and Rožaje.

4. Contingent Subsidies from the Budget of the Republic

For realisation of the priority investment projects from the sphere of communal infrastructure, 1,6 mill € was assigned from the Budget of the Republic for 2007 to municipalities, based on contingent subsidies. These funds were, with the special decrees of the Government, approved to municipalities: Plav (200.000 €), Bijelo Polje (250.000 €), Žabljak (250.000 €), Kolašin (200.000 €), Danilovgrad (550.000 €) and Andrijevica (150.000 €). Including 30. 06. 2007, there were no transfers of funds to municipalities on this base.

5. Subsidies from the Budget of the Republic

For realisation of different projects from the sphere of agriculture, water resources management, tourism and other areas, 0,9 mill € was allocated to municipalities based on budgetary subsidies (from budgetary beneficiaries). on that basis assets were used by municipalities: Bar, Berane, Žabljak, Kotor, Plav, Ulcinj, Herceg Novi, Cetinje and Šavnik.

II REALISATION OF EXPENDITURES

Total expenditures of budgets of all municipalities for first six months 2007, amounted 83,77 mil € which is 81,27 % of planned expenditures (103,08 mill €). In total expenditures, largest share refers to Municipality Podgorica (29,9 %) , and lowest to Municipality Šavnik (0,28 %). Share of expenditures of municipalities: Andrijevica, Mojkovac, Plav, Plužine, Šavnik and Žabljak in total expenditures are less than 1 % of total expenditures of all municipalities.

In the following table an overview is given of realised budgetary expenditures of municipalities for first six months of 2007:

MunicipalityExpenditures of municipalities I-VI 2007

Plan Realisation % of realisationRealisation per capita

Andrijevica 590.721,99 274.180,08 46,41 47,4Bar 5.290.669,00 3.931.776,00 74,32 98,2Berane 2.907.652,58 1.789.501,72 61,54 51,0Bijelo Polje 3.325.000,00 2.507.185,46 75,40 49,9Budva 21.815.000,00 16.506.696,71 75,67 1.037,6Danilovgrad 1.865.000,00 1.551.091,87 83,17 93,9Herceg Novi 6.852.500,00 4.897.657,00 71,47 148,3Kolašin 2.479.615,00 1.678.107,47 67,68 168,7Kotor 6.173.046,16 5.406.928,36 87,59 235,6Mojkovac 995.381,65 545.932,07 54,85 54,2Nikšić 11.894.107,00 7.994.358,97 67,21 106,2Plav 1.020.440,00 485.536,01 47,58 35,2Plužine 732.750,00 506.898,24 69,18 118,7Pljevlja 6.435.000,00 3.636.415,69 56,51 101,6Podgorica 21.683.705,00 25.041.516,74 115,49 148,1Rožaje 1.891.500,00 1.950.005,18 103,09 85,9Tivat 1.823.425,00 1.528.042,92 83,80 112,1Ulcinj 1.447.000,00 1.387.342,63 95,88 68,4Cetinje 2.495.000,00 1.562.222,00 62,61 84,5Šavnik 469.965,54 239.502,98 50,96 81,3Žabljak 895.000,00 350.267,00 39,14 83,3ToTAL 103.082.478,92 83.771.165,10 81,27 135,08

Municipalities Podgorica and Rožaje had the realisation of the budget over 100 % of the plan, while in most other municipalities the percentage of budget realisation is from 50 - 80 % when compared to the plan.

The highest expenditures per capita had municipality Budva (1.037 €), and the lowest municipality Plav (35 €) which means that the relation between the highest and the lowest spending was 1:29. The lowest realisation of budget when compared to the plan had the municipality Žabljak – only 39,14 % of planned expenditures.

Consolidated public spending of municipalities for 6 months of 2007, amounted 70,44 mill € or 3,25 % of estimated GDP. In the structure of public spending, largest share refers to capital expenditures (32,3 mill €) which is 1,49 of % GDP and expenditures for salaries of employees (14,5 mill €), which is 0,67 % of GDP. Municipality Podgorica has the largest share in local public spending of municipalities (1,14 % of GDP), and smallest municipalities Andrijevica and Šavnik (0,01 % of GDP).


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MunicipalityConsolidated expenditures

Consolidated public spending

% of GDP

Debt repayment

Total expendituresCurrent

expensesCapital expenditures

Transfers other expenditures

Andrijevica 156.915,10 9.078,10 98.395,60 0,00 264.388,80 0,01 9.991,28 274.180,08

Bar 999.721,00 2.321.003,00 571.891,00 30.000,00 3.922.615,00 0,18 18.690,00 3.931.776,00

Berane 832.322,39 466.115,01 233.225,64 60.000,00 1.591.663,04 0,07 195.137,09 1.789.501,72

Bijelo Polje 712.310,12 591.183,65 638.565,07 116.000,00 2.058.058,84 0,10 448.458,50 2.507.185,46

Budva 3.855.027,37 5.902.130,78 1.198.325,30 338.935,20 11.294.418,65 0,52 5.213.278,06 16.506.696,71

Danilovgrad 548.704,21 163.368,15 314.507,95 9.996,10 1.036.576,41 0,05 19.515,46 1.551.091,87

Herceg Novi 3.032.474,00 1.048.529,00 508.230,00 53.000,00 4.642.233,00 0,22 308.424,00 4.897.657,00

Kolašin 693.448,43 617.225,70 120.459,86 0,00 1.431.133,99 0,07 246.973,48 1.678.107,47

Kotor 2.007.932,40 1.878.972,22 265.548,47 87.376,66 4.239.829,75 0,20 1.167.098,61 5.406.928,36

Mojkovac 248.575,45 68.983,42 46.463,06 26.250,86 390.272,79 0,02 155.659,28 545.932,07

Nikšić 1.714.801,22 193.927,02 1.195.915,18 1.683.918,28 4.788.561,70 0,22 3.205.797,27 7.994.358,97

Plav 253.105,99 29.743,76 71.836,38 0,00 354.686,13 0,02 130.849,88 485.536,01

Plužine 298.669,89 90.762,07 59.689,99 0,00 449.121,95 0,02 12.758,29 506.898,24

Pljevlja 1.769.574,51 958.091,19 355.005,04 27.220,31 3.109.891,05 0,14 526.524,64 3.636.415,69

Podgorica 4.862.816,11 16.440.844,78 3.041.184,70 132.473,85 24.477.319,44 1,14 574.197,30 25.041.516,74

Rožaje 373.566,19 862.933,13 401.803,49 8.000,00 1.646.302,81 0,08 295.094,37 1.950.005,18

Tivat 889.552,02 346.718,79 274.068,57 13.062,00 1.523.401,38 0,07 941,54 1.528.042,92

Ulcinj 864.845,03 148.670,72 127.243,44 15.414,21 1.156.173,40 0,05 194.215,77 1.387.342,63

Cetinje 742.720,00 106.216,00 167.370,00 21.014,69 1.037.320,69 0,05 546.615,00 1.562.222,00

Šavnik 155.189,14 37.617,88 30.727,00 4.000,00 227.534,02 0,01 15.922,08 239.502,98

Žabljak 269.133,00 16.056,00 62.500,00 45.874,00 393.563,00 0,02 9.323,00 350.267,00

ToTAL 25.281.403,57 32.298.170,37 9.782.955,74 2.672.536,16 70.035.065,84 3,25 13.295.464,90 83.771.165,10

% of the share 30,18 38,56 11,68 3,19 83,60 16,40 100,00

when observed by economic classification, the largest share in total expenditures have capital expenditures (38,56 %). Municipalities Podgorica

and Budva have earmarked the most for capital expenditures (Podgorica 16,4 mill €, Budva 5,9 mill €) and the least municipalities Andrijevica and Žabljak, which earmarked only 0,1 mil €.

Expenditures on the basis of debt repayment and calls in arrears from previous period amounted 13,3 mill € or 16,4 % of total expenditures. Debt repayment amounted 8,2 mill € and repayment of calls in arrears 5,1 mill€. Current expenditures (expenditures for employees, material and services, current maintenance, interests, rent and subsidies to public enterprises) make 30,18% of total expenditures and amount 25,28 mill€. Transfers (to institutions, individuals, non-government sector and public enterprises) were realised to the amount of 9,78 mill €, which is 11,68 % of total expenditures. other expenditures (loans, reserves and other expenditures) were realised to the amount of 2,67 mill € and are 3,19 % of total expenditures.

III DEBT OF MUNICIPALITIES

Total debit of municipalities on 30. 06. 2007, amounted 32,84 mill € which makes 1,52 % of the estimated GDP for 2007. In the following table and overview of debit of municipalities is given by types of debt:

ordinal Type of debit ToTAL in mill € % of GDP

I Domestic debt 15.252.549,90 0,711 Credits 9.220.701,61 0,43a Short-term 3.032.861,15 0,14 Capital amount 3.002.787,27 0,14 Interest 66.526,97 0,00b Long-term 6.308.094,15 0,29 Capital amount 4.376.435,43 0,20 Interest 481.308,63 0,022 Bonds 2.928.509,00 0,143 Guarantees 3.075.015,20 0,14II Foreign debt 17.451.355,44 0,81


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1 Credits 17.343.751,05 0,80a Short-term 1.943.132,88 0,09 Capital amount 1.943.132,88 0,09 Interest 0,00 0,00b Long-term 15.400.618,17 0,71 Capital amount 14.016.841,94 0,65 Interest 1.383.776,23 0,062 Bonds 0,00 0,003 Guarantees 0,00 0,00I+II BUDGETARY DEBIT 32.838.064,98 1,52

In the debt structure the share of the domestic debt is 15,25 mill € or 46,4 % of the total debt, and foreign debt amounts 17,45 mill € or 53,6% of the total debt.

In the structure of the domestic debt, debit on the base of credit amounted 9,22 mill € which makes 0,43 % of GDP. Long term credit liabilities amounted 6,31 mill € and short-term 3,03 mill €. Debit based on issued bonds amounted 2,93 mill € and debit based on given guarantees to public enterprises amounted 3,08 mill €.

Total foreign debt based on foreign credits amounted 17,45 mill € which makes 0,81 % of GDP for reporting period. In the structure of the stated debt 1,94 mill € refers to the short-term credit liabilities and 15,4 mill € to the long-term credit liabilities.

IV CALL IN ARREARS

Total call in arrears of municipalities from previous years on 30. 06. 2007, amounted 20,56 mill € which makes 0,95 % of the estimated GDP for 2007.

In the following table an overview of call in arrears of municipalities by type of liability is given:

ordinal Type of call in arrearToTAL in mil €

% BDP-a

I Liabilities for current expenditures 4.736.802,13 0,22

Liabilities for gross salaries and contributions payable by employer 1.728.787,02 0,08

Liabilities for other personal income 109.163,84 0,01

Liabilities for other current expenditures 3.126.131,27 0,15

II Liabilities for transfers for social security 81.078,00 0,00

III Liabilities for transfers to institutions, individuals and NGo 994.398,49 0,05

IV Liabilities for capital expenditures 7.623.845,70 0,35

V Liabilities for loans and credits 5.180.341,42 0,24

VI Liabilities based on debt repayment 1.606.058,76 0,07

VII Liabilities from reserves 111.681,35 0,01

ToTAL CALL IN ARREARS ( I+II III+IV+V+VI+VII ) 20.561.485,85 0,95

within call in arrears, the largest share have those for capital expenditures – 7,62 mill €, while the liabilities for current expenditures amounted 4,74 mill €. Liabilities based on loans and credits amounted 5,18 mill € and those based on debt repayment 1,61 mill €.

Total debt account of municipalities on 30. 06. 2007, based on credits, guarantees, bonds and call in arrears from previous period amounted 53,39 mill € which makes 2,48 % of GDP. Average account of debt of municipalities per capita amounted 86,1 € (highest in Budva and lowest in Andrijevica).

Vladislav KaradžićIndependent Advisor,

Gordana Radović Independent Advisor


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Consolidated public spending in period January-September 2007, was realised to the amount of 700,55 mil.€. Realised level of public spending was financed from taxes to the amount of 556,08mil.€, duties 26,93 mil.€, contributions 197,84 mil.€, compensations 54,98 mil. € and other receipts 43,64 mil.€. In the same period tax revenues were planned to the amount of 441,16 mil.€, revenues from duties 26,02 mil.€, revenues from contributions 187,45 mil.€, revenues from compensations 48,54 mil € and other revenues to the amount of 20,15 mil.€.

Realised amounts when compared to planned amounts for period January-September 2007, show growth of 21,32% (current revenues) , tax revenues 26,05%, duties 3,49%, compensations 13,27%, contributions 5,54%, while other revenues are 2,16 times higher than planned.

Better collection of current revenues made possible debt repayment to domestic and international financial institutions to the amount of 49,38 mil €, which is 1,49 times higher than planned 33,17 mil €, while repayment of liabilities from previous years is 34,02 mil €, which is 2 times more when compared to planned 16,92 mil €. All due liabilities are regularly serviced.

DESCRIPTIoNPlan January-September

Realisation January-September

% of realisation

Current revenues 732,142,486.95 888,201,139.24 121.32Taxes 441,156,437.93 556,078,952.15 126.05Personal income tax 61,664,380.17 68,750,829.00 111.49Corporate tax 11,374,668.36 32,345,899.25 284.37Property tax 20,080,209.22 34,181,454.18 170.22Value added tax 222,618,675.63 286,455,515.46 128.68Excises 59,273,774.85 67,034,077.55 113.09Tax on international trade and transactions 47,548,855.69 49,328,612.11 103.74Local taxes 15,126,226.01 13,277,488.27 87.78other revenues of the Republic 3,469,647.99 4,705,076.33 135.61Contributions 187,452,000.00 197,838,931.84 105.54Contribution for Pension and Disability Insurance 101,532,000.00 111,061,678.62 109.39Contribution for health insurance 80,722,500.00 82,198,429.00 101.83Contribution for unemployment insurance 5,197,500.00 4,578,824.22 88.10Duties 26,022,835.44 26,931,257.50 103.49Administrative duties 11,345,191.66 8,457,004.01 74.54Court fees 4,314,528.62 6,347,859.72 147.13Residence taxes 1,223,350.03 1,343,518.35 109.82Local municipal taxes 7,707,265.10 8,093,378.35 0.00other duties 1,432,500.03 2,689,497.07 187.75Compensations 48,539,616.72 54,979,664.50 113.27Fees for usage of goods of common interest 2,997,718.57 5,529,775.46 184.47Fees for usage of natural resources 3,097,426.90 2,181,607.59 70.43Ecological fees 1,381,122.64 1,452,903.34 105.20Games of chance fees 2,732,714.14 3,167,341.10 115.90Fees for usage of building land 6,311,070.35 7,226,623.87 114.51Fees for construction and maintenance of local roads 2,606,942.72 3,337,289.86 128.02Road fees 4,665,342.87 4,769,390.36 102.23other compensations 24,747,278.52 27,314,732.92 110.37other revenues 20,146,845.78 43,640,499.96 216.61Yields on capital 330,000.03 14,704,119.11 4,455.79Penalties and divested property benefits 5,523,304.64 7,192,970.36 130.23Revenues made by authorities and their activities 6,722,973.72 12,359,098.93 183.83other revenues 7,570,567.39 9,384,311.56 115.34Receipts from credit repayments 8,824,751.09 8,731,833.29 98.95Receipts from repayments of credits given to other levels of government 6,349,751.09 5,596,003.96 88.13Receipts from repayments of credits given to other institutions 2,475,000.00 3,135,829.33 126.70Expenditures 752,162,817.99 700,546,667.33 93.14

Consolidated Public Spending in Montenegro in Period I - IX 2007


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Current expenditures 347,817,674.54 348,473,367.62 100.19Gross salaries and contributions payable by employer 193,779,606.35 187,542,355.32 96.78Net salaries 111,528,693.13 109,452,385.69 98.14Income tax 21,837,431.59 21,100,045.03 96.62Contributions payable by employee 31,564,100.54 29,438,148.27 93.26Contributions payable by employer 25,699,619.81 24,753,202.92 96.32Municipal surtax 3,149,761.28 2,798,573.42 88.85other personal income 26,526,264.93 23,607,597.45 89.00Material and service expenses 73,433,619.72 87,505,767.71 119.16Current maintenance 19,674,849.78 18,095,517.56 91.97Interests 15,676,647.32 18,153,479.56 115.80Rent 4,548,250.63 4,058,311.10 89.23Subsidies 7,627,426.46 5,661,037.71 74.22other expenditures 6,551,009.35 3,849,301.20 58.76Transfers for social security 193,741,327.48 205,357,084.82 106.00Rights from the field of social security 26,730,731.90 28,288,368.89 105.83Funds for redundancies 10,427,079.95 8,383,604.84 80.40other rights from field of health security 7,077,055.69 7,605,065.00 107.46other rights from field of health insurance 3,510,709.94 4,708,286.00 134.11Transfers to institutions, individuals and non-government sector 83,615,041.32 55,998,977.59 66.97Transfers to public institutions 55,572,318.67 29,206,750.57 52.56Transfers to non-government institutions 7,411,070.76 7,518,105.90 101.44 Transfers to individuals 13,500,391.75 13,485,524.85 99.89Transfers to public enterprises 7,131,260.13 5,788,596.27 81.17Capital expenditures 109,241,335.19 75,989,100.46 69.56Loans and credits 7,682,099.59 5,974,844.09 77.78Reserves 8,481,969.87 8,753,292.75 103.20

DEFICIT / SURPLUS -20,020,331.04 187,654,471.92 Financing 20,020,331.04 -187,654,471.92 Domestic financing -30,353,456.79 -60,662,946.49 199.86

Loans and credits from domestic sources 2,529,454.88 7,851,796.42 310.41Debt repayment 15,963,537.27 34,490,526.67 216.06

Repayment of liabilities from previous period 9,419,374.40 26,110,963.55 277.20Repayment of old foreign currency savings 7,500,000.00 7,913,252.69 105.51

Foreign financing 1,567,322.34 -8,890,926.71 -567.27Credits and securities -1,722,246.59 -9,785,413.94 568.18Loans and credits from foreign sources 15,489,500.00 5,106,777.91 32.97

Debt repayment 17,211,746.59 14,892,191.85 86.52Donations 3,289,568.93 894,487.23 27.19Privatisation income or deposit 40,458,597.54 47,391,424.92 117.14

Increase/reduction of deposit 8,347,867.96 -165,492,023.64 -1,982.45

Consolidated deficit of the public spending for the period January-September 2007, was planned to the amount of 20.02mil.€ and surplus of 187,65 mil.€ was realised. Surplus was the highest in the Budget of the Republic to the amount of 182,01 mil.€ while in the Pension and Disability Insurance Fund deficit was realised to the amount of 0,47 mil.€. Employment Agency has realised the deficit to the amount of 0,84 mil €, Health Insurance Fund of the Republic has realised surplus to the amount of 10,48 mil. € and local self-government surplus to the amount of 6,48 mil. €. Increase of deposits at the end of the period amounts 165,49 mil €.

1. BUDGET OF THE REPUBLIC

Receipts of the Budget of the Republic for period January-September 2007 amount 579,71 mil €. Direct revenues of the Budget of the Republic for period January-September 2007, amount 572,53 mil € and are 29,4% higher than planned. Consolidated expenses of the budget for (months of the current year amount 390,52 mil € and are 12,7% lower than planned.

Tax revenues amount 508,53 mil € and are 28,0 % higher than planned. Higher realisation when compared to plan is evident in all types of taxes. Highest increase when compared to the plan is with corporate income tax – 2,84 times and capital transfer tax – 2,76 times. Revenues based on duties amount 13,75mil €, which is 6,2 % lower when compared to the planned amount; revenues based on compensations amount 16,54 mil €, which is 13,3 % higher than the planned amount. other revenues of the Republic amount 29,93mil €, which is 2,53 % higher than planned amount. This increase is caused by the collected yields on capital to the amount of 13,96 mil. € which were not planned by the Budget for 2007, higher collection of other revenues when compared to planned (70,2%). In this period a budgetary surplus was realised to the amount of 182,01mil € while the increase of deposits at the end of the period 130,93 mil €.


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DESCRIPTIoNPlan January-September 2007

Realisation January-September 2007

% of realisation

Current revenues 442,600,091.64 572,527,499.15 129.4Taxes 397,354,286.22 508,532,070.99 128.0 Personal income tax 48,131,999.19 55,000,663.20 114.3 Corporate income tax 11,374,668.36 32,345,899.25 284.4 Property tax 4,936,664.50 13,662,227.09 276.8 Value added tax 222,618,675.63 286,455,515.46 128.7 Excises 59,273,774.85 67,034,077.55 113.1

Tax on international trade and transactions 47,548,855.69 49,328,612.11 103.7other taxes of the Republic 3,469,647.99 4,705,076.33 135.6

Duties 14,669,093.88 13,754,706.83 93.8Administrative duties 9,974,806.47 6,948,099.56 69.7

Court fees 4,314,528.62 6,347,859.72 147.1 Residence taxes 379,758.79 458,747.55 120.8Compensations 14,598,485.08 16,541,476.27 113.3 Fees for usage of goods of common interest 712,864.68 2,730,678.88 383.1 Fees for usage of natural resources 3,097,426.90 2,181,607.59 70.4 Ecological fees 1,381,122.64 1,452,903.34 105.2

Games of chance fees 2,732,714.14 3,167,341.10 115.9Road fees 4,665,342.87 4,769,390.36 102.2other compensations 2,009,013.84 2,239,555.00 111.5

other revenues 11,847,702.55 29,933,429.63 252.7Yields on capital 0.00 13,960,256.05 0.0

Penalties and divested property benefits 5,312,649.48 6,989,782.44 131.6 Revenues made by authorities and their activities 2,961,608.97 2,901,345.00 98.0 other revenues 3,573,444.10 6,082,046.14 170.2

Receipts from credit repayment 4,130,523.92 3,765,815.43 91.2EXPENDITURES 447,077,127.27 390,516,093.64 87.3

Current expenditures 253,556,297.05 228,758,445.88 90.2Gross salaries and contributions payable by employer 134,871,296.23 131,018,760.88 97.1

Net salaries 78,552,394.19 77,504,223.53 98.7Personal income tax 14,625,787.20 14,225,133.20 97.3Contributions payable by employee 21,949,319.82 20,380,608.58 92.9Contributions payable by employer 17,686,378.13 16,959,891.90 95.9Municipal surtax 2,057,416.89 1,948,903.67 94.7

other personal income 16,626,150.50 13,561,515.02 81.6Material and service expenses 56,497,662.48 41,687,835.86 73.8Current maintenance 15,243,944.82 13,515,254.14 88.7

Interests 14,758,265.26 17,393,807.46 117.9Rent 4,114,103.55 3,740,660.81 90.9Subsidies 7,146,249.97 5,229,662.99 73.2other expenses 4,298,624.24 2,610,948.72 60.7

Transfers for social security 34,187,132.50 31,993,816.64 93.6Rights from the sphere of social protection 26,527,132.53 28,073,001.47 105.8Funds for redundancies 7,659,999.97 3,920,815.17 51.2

Transfers to institutions, individuals, non-government sector and public sector 90,140,191.72 86,651,115.82 96.1Transfers to public institutions 18,904,713.35 16,860,441.72 89.2Transfers to non-government institutions 4,624,311.58 4,753,043.53 102.8Transfers to individuals 5,790,291.96 5,267,966.31 91.0Transfers to Pension and Disability Insurance Fund of the Republic 48,251,999.97 47,690,666.64 98.8Transfers to the Health Insurance Fund of the Republic 5,159,999.97 5,159,999.97 100.0Transfers to the Employment Agency 4,927,500.00 5,952,980.00 120.8Transfers to municipalities 1,555,124.86 671,337.32 43.2Transfers to public enterprises 926,250.03 294,680.33 31.8

Capital expenditures 58,574,688.96 33,588,480.72 57.3Loans and credits 4,557,947.04 4,335,091.08 95.1Repayment of guarantees 1,583,370.00 0.00 0.0Reserves 4,477,500.00 5,189,143.50 115.9

DEFICIT / SURPLUS -4,477,035.63 182,011,405.51 FINANCING 4,477,035.63 -182,011,405.51 Domestic financing -17,569,034.28 -48,966,902.70 278.7

Loans and credits from domestic sources 0.00 0.00 0.00Debt repayment to residents 6,006,262.50 20,758,829.88 345.62Repayment of liabilities from previous period 4,062,771.78 20,294,820.13 499.53old foreign currency savings 7,500,000.00 7,913,252.69 105.51


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Foreign financing 973,027.53 -7,194,258.71 -739.37Credits and securities 523,027.53 -7,256,198.77 -1,387.35

Loans and credits from foreign sources 11,902,500.00 2,044,591.88 17.18Debt repayment to residents 11,379,472.47 9,300,790.65 81.73

Donations 450,000.00 61,940.06 13.76Privatisation revenues 8,548,329.38 5,078,750.00 59.41Increase/reduction of deposit 12,524,713.00 -130,928,994.10 -1,045.37

Positive trends of the collection of current revenues will continue until the end of 2007, and as the result the increase of current budgetary revenues is estimated to 6,62% of GDP. The highest increase is expected with collection of taxes while the collection of other sources of revenues will mostly be in accordance with the plan for 2007. For nine months of 2007 it was collected over 31,0 mil.€ of so called delinquent debt which arose in the earlier periods. Debts of tax payers are reduced to monthly call in arrears which represents significant contribution to the improvement of the tax discipline and fight against the grey economy.

By Law Amending and Supplementing Budget Law for 2007, total receipts of the budget are planned to the amount of 749,09 mil € which is 132,23 mil € higher amount than planned by the Law on Budget for 2007. In the following table an overview of total receipts and differences when compared to the Budget Law for 2007 is given:


DESCRIPTIoN Plan Difference Revision

7 Receipts 616,86 132,23 749,0971 Current revenues 583,49 143,39 726,87711 Taxes 528,70 124,91 653,617111 Personal income tax 66,12 7,75 73,877112 Corporate tax 15,03 25,26 40,297113 Property tax 5,93 8,24 14,177114 Value added tax 297,14 72,57 369,717115 Excises 79,35 6,60 85,957116 Tax on international trade and transactions 60,66 3,22 63,887118 other taxes of the Republic 4,48 1,27 5,75713 Duties 20,12 -2,61 17,527131 Administrative duties 14,25 -4,26 9,997132 Court fees 5,47 1,62 7,097133 Residence taxes 0,41 0,03 0,43714 Compensations 18,64 3,05 21,687141 Fees for usage of goods of common interest 1,35 2,98 4,337142 Fees for usage of natural resources 3,23 -0,48 2,757143 Ecological fees 2,11 0,24 2,357144 Games of chance fees 4,02 0,65 4,677148 Road fees 5,85 -0,46 5,407149 other compensations 2,07 0,11 2,18715 other revenues 16,02 18,03 34,067151 Yields on capital 0,00 13,96 13,967152 Penalties and divested property benefits 8,03 1,95 9,987153 Revenues made by authorities and their activities 3,68 -0,11 3,577155 other revenues 4,31 2,24 6,5572 Receipts from the sale of property 11,40 -3,40 8,00722 Receipts from the sale of financial property 11,40 -3,40 8,007221 Sale of shares 11,40 -3,40 8,0073 Receipts from credit repayment 5,51 -0,76 4,75731 Receipts from credit repayment 5,51 -0,76 4,757311 Receipts from repayment of credits given to other levels 5,51 -0,76 4,7574 Donations and transfers 0,60 0,00 0,60741 Donations and transfers 0,60 0,00 0,607411 Current donations 0,60 0,00 0,6075 Loans and credits 15,87 -7,00 8,87751 Loans and credits 15,87 -7,00 8,877512 Loans and credits from foreign sources 4,87 0,00 4,877512 Project loans 11,00 -7,00 4,00

DIRECT REVENUES OF THE BUDGET

Direct revenues of the Budget, according to revision, are planned to the amount of 731.62 mil.€ and are 142.63 mil. € higher when compared to the funds planned by the Budget Law for 2007. Increase of the direct revenues of the Budget for period January-August 2007, when compared to the plan for the same period, and estimations of the Ministry of Finance on collection of direct revenues of the Budget of the Republic of Montenegro until the end of 2007. Higher collection of direct revenues in 2007 when compared to the planned amount is the result of increased economic activity in the sphere of civil engineering, traffic, tourism, trade, banking, increase of the net foreign direct investments


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and increase of the turnover at the capital market which resulted in significant increase of import, of market value and turnover of real-estates and increase of the salaries in the Republic.

TAXES

Taxes, according to the revision, are planned to the amount of 653.61 mil. € and are 124.91 mil. € higher when compared to the funds planned by the Budget Law for 2007.

Personal income tax is planned to the amount of 73,87 mil € and is 7,75 mil € higher than the amount planned by the Budget Law for 2007. Reasons for increase are the growth of the number of employed persons and increase of earnings in the Republic in 2007.

Corporate tax is planned to the amount of 40,29 mil € and is 25,26 mil € higher than the amount planned by the Budget Law for 2007. This increase is the result of the growth of the reported profit of legal persons in 2006. and 2007.

Property tax, or the tax on turnover of real estates, is planned to the amount of 14,17 mil € and is 8,24 mil € higher than the amount planned by the Budget Law for 2007. In this year it came to the significant increase of the prices at the real-estate market and growth of turnover.

Value added tax is planned to the amount of 369,71 mil € and is 72,57 mil € higher than the amount planned by the Budget Law for 2007. Causes of this increase are the higher economic activity, reduction of grey economy and stronger efforts of the Tax Administration and Customs for collection of the value added tax.

Excises are planned to the amount of 85,95 mil. € and are 6,59 mil € higher than the amount planned by the Budget Law for 2007, as the result of fight against the illegal trade in cigarettes.

Tax on international trade and transactions is planned to the amount of 63,88 mil € and is 3,21 mil. € higher when compared to the amount planned by the Budget Law for 2007.

other taxes of the Republic are planned to 5,75 mil € and are 1,27 mil € higher than the amount planned by the Budget Law for 2007.

DUTIES

Duties, by revision, are planned to the amount of 17,52 mil € and are 2,61 mil € lower than the amount planned by the Budget Law for 2007. Administrative duties are planned to the amount of 9,99 mil € and are 4,26 mil € lower than the amount planned by the Budget Law for 2007. Reason for reduction is the delay in changing of the personal identification documents in 2007, and the revenue on this ground was planned by the Budget Law for 2007. Court duties are planned to the amount of 7,09 mil € and are 1,62 mil € higher when compared to the amount planned by the Budget Law for 2007.

Residence taxes are planned to the amount of 0,43 mil € and are slightly higher than the amount planned by the Budget Law for 2007.

COMPENSATIONS

Compensations, according to revision, are planned to the amount of 21,68 mil € and are 3,05 mil € higher than the amounts planned by the Budget Law for 2007. Compensations for usage of goods of common interest are planned to the amount of 4.33 mil € and are 2.98 mil € higher than the amount planned by the Budget Law for 2007. Increase is the result of the significantly higher collection of compensations based on the usage of waters in the first eight months of 2007. Compensations for usage of natural recourses are planned to the amount of 2.75 mil € and are 0.48 mil € lower when compared to the amount planned by the Budget Law for 2007. Cause for this is the realised privatisation in the sector of wood-processing and delay of the tender for concessions on woods in 2007.

Ecological compensations are planned to the amount of 2.35 mil € and are 0.24 mil € higher than the amount planned by the Budget Law for 2007. Compensations for organising of games of chance are planned to the amount of 4.67 mil € and are 0.65 mil € higher than the amount planned by the Budget Law for 2007.

Road fees are planned to the amount of 5.40 mil € and are 0.46 mil € lower than the amount planned by the Budget Law for 2007.

OTHER REVENUES

other revenues, by revision, are planned to the amount of 34.06 mil € and are 18.03 mil € higher than the funds planned by the Budget Law for 2007.

Penalties and divested property benefits are planned to the amount of 9.98 mil € and are 1.96 mil € higher than those planned by the Budget Law for 2007

Revenues made by authorities and their activities are planned to the amount of 3.57 mil € and are 0.11 mil € lower when compared to the amount planned by the Budget Law for 2007.

other revenues are planned to the amount of 6.55 mil € and are 2.24 mil € higher than the amount planned by the Budget Law for 2007.Yields on capital are planned to the amount of 13.96 mil €. Yields on capital were not planned by the Budget Law for 2007.

2. PENSION AND DISABILITY INSURANCE FUND

Spending of Pension and Disability Insurance Fund for period January-September 2007 was realised to the amount of 160,64 mil.€. Spending of the Fund was financed from contributions to the amount of 111,06 mil.€, other revenues 1,42 mil.€ and transfers from the Budget of the Republic 47,69 mil.€. Total level of current revenues is 0,47 mil.€ lower than realised spending (deficit). Increase of deposit at the end of period is 2,80 mil €.


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Realisation January- eptember

% of realisation

Current revenues 102,282,000.00 112,476,715.10 109.97Contributions 101,532,000.00 111,061,678.62 109.39

Contributions for pension and disability insurance 101,532,000.00 111,061,678.62 109.39other revenues 750,000.00 1,415,036.48 188.67

Yields on capital 0.00 571,709.00 0.00Revenues made by authorities and their activities 0.00 867.46 other revenues 750,000.00 842,460.02 112.33

Expenditures 150,533,999.97 160,641,309.41 106.71Current expenditures 3,923,249.94 3,804,430.77 96.97

Gross salaries and contributions payable by employer 1,702,499.91 1,370,472.15 80.50Net salaries 1,013,249.97 928,139.61 91.60Income tax 210,749.94 0.00

Contributions payable by employee 243,000.00 240,378.54 98.92 Contributions payable by employer 202,500.00 177,718.80 87.76

Municipal surtax 33,000.00 24,235.20 73.44other personal income 204,750.00 239,303.99 116.88Material and service expenses 1,500,000.03 1,928,677.09 128.58

Current maintenance 120,000.00 99,230.71 82.69Interests 300,000.00 59,861.45 19.95Rent 37,500.00 30,425.71 81.14other expenditures 58,500.00 76,459.67 130.70

Transfers for social protection 145,995,750.00 156,371,760.09 107.11Rights from the sphere of pension and disability insurance 145,995,750.00 156,371,760.09 107.11

Transfers to institutions, individuals non-government and public sector 225,000.00 292,260.52 129.89

Transfers to public institutions Transfers to non-government organisation 209,325.52 Transfers to individuals 225,000.00 82,935.00 36.86

Capital expenditures 150,000.00 97,858.03 65.24Loans and credits 127,500.03 75,000.00 58.82Reserves 112,500.00 0.00

Deficit 0.00 -473,927.67Financing 0.00 473,927.67

Domestic financing 0.00 -12,495.77 Loans and credits from domestic sources 0.00 2,000,000.00 Debt repayment 2,012,495.77

Revenues from privatisation 3,282,028.46 Transfers 48,251,999.97 47,690,666.64 98.84Increase/reduction of deposits 0.00 -2,795,605.02

In this period revenues from contributions are planned to the amount of 101,53 mil.€, other revenues 0,75 mil.€ and transfers from the Budget of the Republic 48,25 mil.€. Realised amounts when compared to planned show that in this period, current revenues of the Pension and Disability Insurance Fund were realised to the amount higher than planned for 19,97 %. Consolidated expenditures of the Fund were realised 106,71 %of planned.

138,39

201,53225,51

166,20

0,00

50,00

100,00

150,00

200,00

250,00

Q1 ostvarenje Q2 ostvarenje Q3-plan Q4-plan

realisation realisation


�3

3. HEALTH INSURANCE FUND

Funds paid for health protection, which is financed through the Health Insurance Fund, for period January-September 2007, amount 93,54 mil.€. Spending of the Fund was financed from contributions to the amount of 82,20 mil.€, transfers from the Budget of the Republic 5,16 mil € .



% of realisation

Current revenues 81,779,309.06 88,860,463.00 108.66Contributions 80,722,500.00 82,198,429.00 101.83

Contributions for health insurance 80,722,500.00 82,198,429.00 101.83other revenues 1,056,809.06 6,631,103.00 627.46

Revenues made by authorities and their activities 1,056,809.06 6,631,103.00 627.46Receipts from credit repayments and funds transferred from previous year 0.00 30,931.00 0.00

Receipts from repayments of credits given to other institutions 0.00 30,931.00 0.00Expenditures 86,939,309.06 93,540,232.00 107.59

Current expenditures 43,778,358.04 71,193,765.00 162.62Gross salaries and contributions payable by employer 35,937,603.22 34,477,139.00 95.94

Net salaries 20,147,019.16 19,471,995.00 96.65Income tax 4,298,767.98 4,328,864.00 100.70Contributions payable by employee 5,947,934.06 5,445,201.00 91.55Contributions payable by employer 4,857,951.85 4,745,048.00 97.68Municipal surtax 685,930.17 486,031.00 70.86

other personal income 5,519,863.82 5,965,775.00 108.08Material and service expenses 1,000,530.25 29,744,863.00 2,972.91Current maintenance 92,371.50 655,983.00 710.16

Interests 168,264.75 344,247.00 204.59Rent 3,425.49 5,758.00 168.09other expenditures 1,056,299.01 0.00 0.00

Transfers for social protection 10,587,765.63 12,313,351.00 116.30other rights from field of health security 7,077,055.69 7,605,065.00 107.46other rights from field of health insurance 3,510,709.94 4,708,286.00 134.11

Transfers to institutions, individuals, non-government and public sector 32,573,185.39 8,700,026.00 26.71Transfers to public institutions 32,573,185.39 8,663,026.00 26.60Transfers to individuals 0.00 37,000.00 0.00

Capital expenditures 0.00 1,333,090.00 0.00Deficit 0.00 480,230.97 Financing 0.00 -480,230.97

Domestic financing 0.00 1,139,504.00 Loans and credits from domestic sources 0.00 2,217,477.00 Debt repayment 0.00 1,077,973.00

Revenues from privatisation 0.00 6,900.00 Transfers 5,160,000.00 5,159,999.97 100.00Increase/reduction of deposit 0.00 -1,626,634.97

REMARKS:

- with the Financial Plan of the Fund for 2007, revenues are envisaged for the financing of health system which does not include other revenues of health institutions which they realise at the market by their activities.

- Presented gross salaries in the column of realisation refer to paid gross salaries of public health institutions and the Fund for eight months of 2008 (without AU Montefarm, which submits the report by regulations for enterprises and at the same time it is in the system of health institutions), while the planned gross salaries refer to nine months 2007.godine as it is determined by the Financial Plan of the Fund for 2007.

- the Plan for the nine months of 2007 determines expenditures to the amount of 32,57 mil. € refer to the transfers to the health institutions at the primary, secondary and the tertiary level encompassing current expenditures (medications and other expendable material, material costs and other).

Health Fund for the period January-September 2007, has realised the surplus to the amount of 0,48 mil. € and the increase of the deposit to the amount of 1,63 mil.€.


��

4. EMPLOYMENT AGENCY

Funds paid for financing of liabilities of the Employment Agency for period January-September 2007 amounted 17,44 mil.€. Liabilities of the Employment Agency were financed from contributions to the amount of 4,58mil.€, other revenues 0,27 mil.€, duties2,69 mil € and transfers from the Budget of the Republic 4,44 mil.€. Total level of current revenues is 0,84mil.€ lower than realised spending and missing funds were financed from deposits 0,63 mil.€, donations 0,09 mil. € and revenues from privatisation 0,47 mil €.

In this period revenues from contributions were planned to the amount of 4,58 mil.€, other revenues 0,27 mil.€ and transfers from the Budget of the Republic 5,95 mil.€. Realised amounts when compared to planned show that for 9 months of 2007, current revenues of the Employment Agency were realised to amount 12,27 % higher than planned.



% of realisation

Current revenues 9,476,250.03 10,639,012.10 112.27

Contributions 5,197,500.00 4,578,824.22 88.10

Contribution for unemployment insurance 5,197,500.00 4,578,824.22 88.10

Duties 1,432,500.03 2,689,497.07 187.75

other duties 1,432,500.03 2,689,497.07 187.75

other revenues 371,250.00 265,792.48 71.59

Yields on capital 330,000.03 172,154.06 52.17

other revenues 41,249.97 93,638.42 227.00

Receipts from credit repayment and funds transferred from previous year 2,475,000.00 3,104,898.33 125.45

Receipts from credits given to other institutions 2,475,000.00 3,104,898.33 125.45

Expenditures 17,778,750.03 17,435,082.16 98.07

Current expenditures 5,869,499.94 5,076,702.68 86.49

Gross salaries and contributions payable by employer 2,666,999.97 2,500,917.43 93.77

Net salaries 1,455,750.00 1,440,538.57 98.96

Income tax 400,500.00 285,620.47 71.32

Contributions payable by employee 400,500.00 392,149.68 97.92

Contributions payable by employer 344,999.97 338,380.26 98.08

Municipal surtax 65,250.00 44,228.45 67.78

other personal income 576,000.00 610,489.44 105.99

Material and service expenses 2,194,499.97 1,725,971.33 78.65

Interests 300,000.06 111,063.75 37.02

Current maintenance 74,999.97 97,858.04 130.48

Rent 45,000.00 21,762.92 48.36

other expenditures 11,999.97 8,639.77 72.00

Transfers for social protection 2,745,000.00 4,442,970.68 161.86

Funds for redundancies 2,745,000.00 4,442,970.68 161.86

Transfers to institutions, individuals, non-government and public sector 5,939,250.03 6,739,770.75 113.48

Transfers to individuals 5,939,250.03 6,739,770.75 113.48

Capital expenditures 1,200,000.06 56,582.05 4.72

Loans and credits 2,025,000.00 1,119,056.00 55.26

Deficit -3,375,000.00 -843,090.06 24.98

Financing 3,375,000.00 843,090.06 24.98

Domestic financing -1,125,000.00 -124,613.47 11.08

Loans and credits from domestic sources 0.00 1,460,000.00 0.00

Debt repayment 1,125,000.00 1,584,613.47 140.85

Foreign financing 0.00 206,757.92 0.00

Donations 0.00 206,757.92 0.00

Revenues from privatisation 4,500,000.00 475,762.46 10.57

Transfers 4,927,500.00 5,952,980.00 120.81

Increase/reduction of deposits 0.00 285,183.15 0.00


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5. LOCAL SELF-GOVERNMENTEvaluated consolidated expenditures of the local self-government for first nine months of 2007 amounted 98,41mil.€. Spending was

financed from taxes to the amount of 47,55 mil.€, transfers 1,19 mil.€, duties 10,49 mil.€, compensations 38,44 mil € and other revenues 7,2 mil.€. Consolidated balance shows deficit of 6,48 mil €.

Realised amounts when compared to planned show that in nine months of 2007 current revenues in the local self-government were realised to the amount higher than planned- 108,01% of the planned, while consolidated expenditures were realised with 89,21% when compared to the plan. Increase of the deposit at the end of the third quarter amounts 30,43 mil.€ thanks to the revenues from privatisation.



% of realisation

Current revenues 96.004.836,21 103.697.449,89 108,01Taxes 43.802.151,71 47.546.881,16 108,55

Personal income tax 13.532.380,98 13.750.165,80 101,61Property tax 15.143.544,72 20.519.227,09 135,50Local taxes 15.126.226,01 13.277.488,27 87,78

Duties 9.921.241,53 10.487.053,60 105,70Administrative taxes 1.370.385,19 1.508.904,45 110,11Residence taxes 843.591,24 884.770,80 104,88Local municipal taxes 7.707.265,10 8.093.378,35 105,01

Compensations 33.941.131,64 38.438.188,23 113,25Fees for usage of goods of common interests 2.284.853,89 2.799.096,58 122,51Fees for usage of building land 6.311.070,35 7.226.623,87 114,51Fees for construction and maintenance of local roads 2.606.942,72 3.337.289,86 128,02other compensations 22.738.264,68 25.075.177,92 110,28

other revenues 6.121.084,16 5.395.138,37 88,14Receipts from credit repayment 2.219.227,17 1.830.188,53 82,47

Expenditures 110.311.114,99 98.409.765,94 89,21Current expenditures 40.690.269,57 39.640.023,29 97,42

Gross wages and contributions payable by employer 18.601.207,02 18.175.065,86 97,71Net wages 10.360.279,81 10.107.488,98 97,56Income tax 2.301.626,47 2.260.427,36 98,21Contributions payable by the employee 3.023.346,66 2.979.810,47 98,56Contributions payable by the employer 2.607.789,86 2.532.163,96 97,10Municipal taxes 308.164,22 295.175,10 95,79

other personal income 3.599.500,61 3.230.514,00 89,75Material and service expenses 12.240.926,99 12.418.420,43 101,45Current maintenance 3.918.533,40 3.713.985,96 94,78Interests 375.117,34 257.705,61 68,70Rent 348.221,59 259.703,66 74,58Subsidies 481.176,49 431.374,72 89,65other expenditures 1.125.586,13 1.153.253,04 102,46

Transfers for social protection 225.679,35 235.186,41 104,21Transfers to institutions, individuals, non-government and

public sector15.214.897,51 13.611.620,32 89,46

Transfers to public institutions 4.094.419,93 3.683.282,85 89,96Transfers to non-government organisations 2.786.759,18 2.555.736,85 91,71Transfers to individuals 1.545.849,76 1.357.852,79 87,84Transfers to municipalities 582.858,53 520.831,89 89,36Transfers to public enterprises 6.205.010,10 5.493.915,94 88,54

Capital expenditures 49.316.646,17 40.913.089,66 82,96Loans and credits 971.652,52 445.697,01 45,87Reserves 3.891.969,87 3.564.149,25 91,58

Deficit -12.168.295,39 6.479.853,17 -53,25Financing 12.168.295,39 -6.479.853,17 -53,25

Domestic financing -11.659.422,51 -12.698.438,55 108,91 Loans and credits from domestic sources 2.529.454,88 2.174.319,42 85,96 Debt repayment 8.832.274,77 9.056.614,55 102,54

Repayment of liabilities from the previous period 5.356.602,62 5.816.143,42 108,58Foreign financing 594.294,81 -1.903.425,92 -320,28 Loans and credits from foreign sources 3.587.000,00 3.062.186,03 85,37 Debt repayment 5.832.274,12 5.591.401,20 95,87

Donations 2.839.568,93 625.789,25 22,04Revenues from privatisation 27.410.268,17 38.547.984,00 140,63Transfers 2.137.983,39 1.192.169,21 55,76Increase/reduction of deposits -4.176.845,07 -30.425.972,70 728,44


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ESTIMATION OF CONSOLIDATED PUBLIC SPENDING FOR 2007

Estimated public spending in 2007 amounts 1.056,85 mil € or 49,04 % of GDP. with other level of consolidation we come to the total level of public spending of 47,12 % GDP. Share of the current public spending (consolidated public spending reduced for capital expenditures-Capital budget of the Republic of Montenegro, capital expenditures in the current budget and capital expenditures of funds and municipalities) in 2007 is estimated to 906,55 mil € which makes 42,07 % of GDP for 2007.

DESCRIPTIoN Projection 2007 % of GDP

Current revenues 1122,63 52,09Taxes 719,73 33,40Contributions 257,27 11,94Duties 34,55 1,60Compensations 69,24 3,21other revenues 29,89 1,39Receipts from credit repayment 11,95 0,55 EXPENDITURES (I level of consolidation) 1056,85 49,04 EXPENDITURES (II level of consolidation) 1015,49 47,12CURRENT PUBLIC SPENDING 906,55 42,07Current expenditures 482,28 22,38Gross salaries and contributions payable by the employer 279,16 12,95other personal income 29,32 1,36Material and service expenses 99,77 4,63Current maintenance 26,85 1,25Interests 20,63 0,96Rent 6,06 0,28Subsidies 13,86 0,64other expenditures 6,63 0,31Transfers for social protection 319,93 14,85Transfers to institutions, individuals, NGo and public sector 75,44 3,50Capital expenditures 150,30 6,97Loans and credits 11,33 0,53Repayment of guarantees 2,11 0,10Reserves 15,45 0,72

DEFICIT / SURPLUS 65,78 3,05 Financing -65,78 -3,05Domestic financing -60,72 -2,82Foreign financing -52,52 -2,44

Donations 1,61 0,07Project loans 4,00 0,19

Revenues from privatisation or deposits 62,24 2,89Increase/reduction of deposits -14,78 -0,69

Public revenues for 2007 are estimated to the amount of 1.122,63 mil.€ which makes 52,09 % of GDP for 2007. In the structure of public revenues the largest share have the taxes – 719,73 mil € or 33,4 % of GDP, than contributions – 257,27 mil € or 11,94 % of GDP. Taxes participate in total public revenues with 64 %, contributions with 23 % while all other revenues make 13 % of total public revenues.

Estimated surplus of revenues over expenses in 2007, amounts 65,78 mil.€ which makes 3,05 % of estimated GDP for 2007. Surplus of revenues enables the debt repayment in call in arrears and increase of the deposit of the public sector which is estimated at 14,78 mil € which makes 0,69 % of GDP for 2007.

Stanko Jeknić, Coordinator of Macroeconomic Analysis and International Cooperation Department, Vladislav Karadžić, Independent Advisor, Radovan Živković, Independent Advisor

65,78

1.056,851.122,63

Javni prihodi Javni rashodi Višak prihodaPublic revenues public expenses surplus of revenues