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Public debt BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006 loans; European Investment Bank; European Bank for Reconstruction and Development; European Community and German Bank for Reconstruction (KfW). 2. INTERNAL PUBLIC DEBT Internal public debt of Montenegro includes: liabilities arising out of old foreign currency savings; liabilities arising out of borrowings from local financial and other institutions; liabilities resulting from issued short-term T-bills; debt contracted by local self-governments and outstanding budgetary payments. Table 4. Structure and amount of internal public debt 3. INDICATORS OF INDEBTEDNESS OF MONTENEGRO - CONCLUDING REMARKS Table below shows standard indicators of indebtedness, calculated on the basis of the above and currently available data. Table 6. Indicators of indebtedness of Montenegro for 2004 Gross Public Debt, in mil. EUR 700,4 External Public Debt, in mil. EUR 513,3 Gross Public Debt/GDP 42,7% External Public Debt/GDP 31,3% Source: Ministry of Finance M.Econ. Nikola Vukićević Source: Ministry of Finance It is evident that borrowing on the basis of T-bills is reduced, while debt from bank credits is fully removed. Accordingly, borrowing on the basis of T-bills amounted to EUR 8,0 million or by EUR 29,4 million less comparing to end 2004, while debt from bank credits amounting EUR 8,9 million at the end of 2004 was fully repaid. About EUR 6 million of old foreign currency savings bonds was repaid, which is less than as planned under the annual Budget Law - EUR 8,7 million. Liabilities arising out of outstanding budgetary payments were reduced by EUR 20 million, while total local self-governments' debt was reduced by about EUR 2 million. Domestic debt was less by EUR 67 million totally comparing to debt amount as of 31 December 2004. 3 - Prema projekciji Deutsche Bank Research According to originally used methodology of the World Bank (Debt Reporting System), a share of external debt in Gross Domestic Product which is less than 30% indicates less indebted country; from 30% to 50% indicates moderately indebted country (Montenegro having 31,3%, is at the lower margin of moderately indebted countries); and share over 50% indicates a severely indebted country. For comparison purposes, at the end of 2004, in some countries in transition, such indicator was as follows: Bulgaria 57,6%; Czech Republic 37,4%; Croatia 79,9%; Lithuania 43,2%; Hungary 59,0%; Romania 39,8%; Slovenia 50,1%. Taking into account further reduction of debt to the Paris Club, constraints on further borrowing and stabile GDP growth, it is likely that Montenegro will be included among less indebted countries in future. With respect to GDP for 2005, gross public debt of Montenegro accounted for 42,7% at the end of 2005. It is significantly less than identified fiscal criterion and maximum public debt allowed by the EU, whereby Montenegro meets one of the two Maastricht criteria. According to the following two indicators, given in the Table above (external public debt/ export and repayment of foreign debt/ export), Montenegro is classified as a less indebted country. Namely, share of external public debt in total export in Montenegro accounts for 80,7%, which is significantly less than marginal value (165%), separating less indebted countries from moderately indebted countries. Level of indebtedness or proportion of foreign debt repayment and total export in Montenegro is 3,7%, which is also significantly less than a limit for moderately indebted countries which is set as 10%. Coordinator, Debt Management Department NIKOLA VUKIĆEVIĆ, M.Econ. 26
World Bank and Relations with the WB The World Banks (WB) was founded in 1944 as an International Bank for Reconstruction and Development (IBRD). Its original mission was to finance the reconstruction of nations devastated by the World War II and at that moment it had 38 members. The number has been increased to current 184 members. The World Bank is present in 100 countries, having 10.600 employees world wide. World Bank Group consists of five closely associated institutions: 1. The International Bank for Reconstruction and Development (IBRD) offers loans to mid-income countries. The funds for this lending come primarily from the issuing of its bonds on the global capital markets. 2. International Development Association (IDA) offers assistance to the poorest countries with a per capita income of less than US$ 885, by providing interest-free loans, technical assistance and policy advices on national economy management. . 3. International Finance Corporation (IFC) promotes growth in member countries through private sector and real investments. 4. Multilateral Investment Guarantee Agency (MIGA) promotes the flow of foreign direct investment among member countries by insuring investors against non-commercial (political) risk, and by providing promotional and advisory services to help member countries create an attractive investment climate. 5. The International Centre for Settlement of Investment Disputes (ICSID) provides facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States. Ex-SFRY was a member country of all these five affiliations of the World Bank Group. International Bank for Reconstruction and Development (IBRD) was founded in 1944 at the Bretton Woods Conference simultaneously with the International Monetary Fund. Yugoslavia was one of the 38 founding countries of the two international financial organizations. Upon signing documentation in Washington on 27 December 1945, Yugoslavia formally joined the Bank and Fund. Following break up of former SFRY, manner of refinancing of outstanding liabilities resulting from previously used loans was agreed upon for the SRY. On 25 February 1993, the Board of Executive Directors of the International Bank for Reconstruction and Development adopted the Resolution No. 93-2, regulating the question of cessation and succession of the SFRY membership to this institution, according to which SRY participates with 36,52% in share of capital. State Union Serbia and Montenegro renewed membership to the World Bank in May 2001. Relations with World Bank Jadranka Radunović BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006 Regulation of outstanding liabilities to the IBRD has opened a perspective for new borrowing. Serbia and Montenegro, as a country highly burdened with debts, was granted the IDA status in period from 2001- 2004, enabling it to contract debts with the International Development Association (IDA) under favourable terms Review of Financial Arrangements with the World Bank Following renewal of the membership, the World Bank has approved Montenegro credit funds for macroeconomic stability, market economy development and implementation of infrastructure projects. In addition to contacts with the WB representatives stemming from the above financial arrangements, representatives of the Government of the Republic of Montenegro held meetings in March 2004 with the International Finance Corporation (IFC), in Istanbul concerning unsettled claims of beneficiaries of other IFC loans from the territory of the Republic of Montenegro. It was agreed, inter alia, that the Government should assume unsettled claims of legal persons to the IFC, and that the IFC should write-off outstanding debt interest, including default interest. It was also agreed that the consolidated debt - other IFC loans should be settled by conversion of part of the debt into 10% of share capital of the Podgorička banka, while the remaining part of the debt should be paid in 18 semiannual installments in a way specified under the Agreement between the Government and the IFC signed in mid April 2005. Two credits extended by the World Bank to Serbia and Montenegro in the previous period are particularly noteworthy: Structural Adjustment Credit I and Structural Adjustment Credit II. The SAC I amounting USD 15 million was approved to Montenegro in 2002 for the purpose of providing support to reforms in various fields, whose middle-term objective was establishing macroeconomic stability, stimulating growth and improving social situation. This credit was fully realized. The SAC II was approved to Serbia and Montenegro in 2004. USD 18 million of credit funds were allocated for the Republic of Montenegro. The credit is intended for the reform of financial, pension and healthcare system, including other areas as well. Delegation of the World Bank set conditions which are to be met for the realization of the credit, relating to implementation of reforms in the said fields. Planned reforms in the financial sector will enhance transparency of overall financial sector; and strengthen institutional capacity and accountancy of key public sec- 27
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Page 5 and 6: TABLE OF CONTENTS BULLETIN OF THE M
Page 7 and 8: Introduction BULLETIN OF THE MINIST
Page 9 and 10: PROJECT "1000 HOUSING CREDITS” BU
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Page 13 and 14: Guidebook to the tax system BULLETI
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