RepublIC OF THE MinistRY OF FINANCE

Re­public of Monte­ne­gro Ministry of Finance­ bulle­tin IX July - Se­pte­Mbe­R 2007

www.mi­ni­s­tar­s­tvo-fi­nans­i­ja.vlada.cg.yu

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

TABLE OF CONTENTS

6-7 EDITORIAL - Igor Lukšić, PhD, Minister of Finance

8-10 LAW AMENDING AND SUPPLEMENTING BUDGET LAW OF THE REPUBLIC OF MONTENEGRO FOR 2007 - Nikola Vukićević MA, Assistant to the Minister

11 UNPRECEDENTED BUDGETARY SURPLUS AS A STEP forward regarding THE INFRASTRUCTURAL PROJECTS: Measure twice before you cut - Dragana Crvenica, Journalist of the daily „Vijesti“

12-16 LAW AMENDING AND SUPPLEMENTING BUDGET LAW FOR 2007- CAPITAL BUDGET - Ljiljana Crnčević, Coordinator of the Department for Public Investment Planning

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

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

19-25 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

26-27 ESTABLISHMENT OF THE REAL ESTATE CADASTRE ON REGIONS OF MUNICIPALITIES PODGORICA, , AND BERANE - Real Estate Administration

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

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

29-30 DRAFTING OF THE NATIONAL PROGRAMME OF INTEGRATION (NPI) AND ECONOMIC AND FISCAL PROGRAMME (EFP) - Bojana Bošković, Senior Advisor Republic of Montenegro 31 LAW AMENDING AND SUPPLEMENTING THE LAW ON Ministry of Finance RESTITUTION OF EXPROPRIATED PROPERTY RIGHTS AND Bulletin of the Ministry of Finance COMPENSATION July-September 2007 - Maja Mitrović, Independent Advisor NUMBER: 9 32-34 PEMPAL - Nikola Vukićević MA, Assistant to the Minister PUBLISHED: quartely - Richard Bartolomew, US Treasury Advisor PUBLISHER: 35-40 QUESTIONS FOR MINISTRY OF FINANCE BY MEDIA Republic of Montenegro REPRESENTATIVES Ministry of Finance - Most Frequent Questions of Media and Answers FOR PUBLISHER: - period July - September 2007 Igor Lukšić, PH.D. - Ana Miljanić, Spokesperson EDITOR-IN-CHIEF: Ana Miljanić REVIEW OF THE MOST IMPORTANT ACTIVITIES 41-44 ASSISTANT EDITOR-IN-CHIEF: OF THE MINISTER OF FINANCE Biljana Bataković - period July - September 2007 EDITORIAL BOARD: Ana Miljanić - Spokesperson Koviljka Mihailović Biljana Bataković - Assistant Spokesperson Milorad Katnić Krsto Racković

45-47 INFO/REVIEW OF OTHER NEWS TRANSLATOR: - period July - September 2007 Jelena Čađenović Ana Miljanić - Spokesperson, DESIGN: Biljana Bataković - Assistant Spokesperson Adil Tuzović

48-50 CONTACT: PUBLIC DEBT OF THE REPUBLIC OF MONTENEGRO PR Office of the - period July - September 2007 Ministry of Finance - Nemanja Pavličić, Coordinator of the Department for Public Debt TEL: Management, Indebtedness Analysis, Cash Management and International +381 81 224 581 Relations FAX: +381 81 224 450 51-55 REALISATION OF PUBLIC SPENDING AT THE LOCAL LEVEL - period January - June 2007 E-MAIL: [email protected] - Vladislav Karadžić, Independent Advisor, WEB: - Gordana Radović, Independent Advisor www.ministarstvo-finansija.vlada.cg.yu

ADRESS: 56-66 CONSOLIDATED PUBLIC SPENDING IN MONTENEGRO Stanka Dragojevića br 2, Podgorica - period January - September 2007, - Stanko Jeknić, Coordinator of Macroeconomic Analysis and International PRINT: Grafotisak Cooperation Department, Vladislav Karadžić, Independent Advisor, COPYES: 400 Radovan Živković, Independent Advisor

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

Editorial Minister of Finance IGOR LUKŠIĆ PhD

CONTACT: Dear readers, PHONE: +381 81 242-835 FAX: +381 81 224 450 Budgetary process has been total- their consolidation in the budgetary E-MAIL: ly intensified and their characteristics account which should be confirmed [email protected] are the revision for 2007, preparations by the Parliament of Montenegro. WEB: for making of the Budget for 2008, Budget for 2008, will show, not only www.ministarstvo-finansija.vlada.cg.yu and changes of the systematic Law the Budget of the Republic but also on Budget. the expenditures of all State funds. Furthermore, the estimation of the Drafting and adoption of the Law spending of local self-governments Amending and Supplementing Bu­ and regulatory bodies, and for the first dget Law for 2007, represents the time the commentary of the budget introduction for the next fiscal year. will include the balances of the most Envisaged increase of salaries and important public enterprises. All this strengthening of the capital expen- is provided by the changes of the ditures will typical for last months systematic Law on the Budget and the of the current year. Unprecedented Budgetary Procedure. State accounts realisation of the budgetary revenues for the next year, unlike the current inspires strong optimism regarding year, will be balanced with the mild the stability of public finances. High surplus, which is caused by, first after planned surplus of about 4% of GDP, many years, the significant growth of strong growth of economy and fur- salaries in the wider public service. ther reduction of foreign debt are Besides, it will come to the increase the signals of expansional economic of the capital budget through the cycle. opening of many new projects. Tax reforms will also be continued due to Expected key changes in the bud- the application of new rates of con- getary policy in 2008, are reflected tributions, which should additionally through further strengthening of improve the competitiveness of the the system of public finances with economy.

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

Expansion cycle has, however, also Dear readers, the other side about which we should be extra cautious. Fast growth of cred- This number of the Bulletin of the its, high prices of real estates, but Ministry of Finance has enriched by also the lower tax rates stimulate the the new segment-from journalists’ investments and personal spending. point of view. We will try to make our The trend of the fast growth of the edition available to the public sphere money supply is evident. Because of in this way, in order to provide expres- that, it is necessary to continue with sion of various opinions on fiscal and the policy of structural reforms which economic policy by contributing to in the long term can be the solution the debate on themes which will be for slowing down of the economy, more and more dominant after the because the stronger regulation of adoption of the new Montenegrin the banking sector by the Central Constitution. I hope that the new Bank after the adoption of the new space in bulletin will be filled with Law on Banks is to be expected. the attitudes of representatives of the Adoption of the new Law on Labour, non-government sector, refreshing in elimination of some business barriers, this way the kind of the public debate further restructuring of the energy on public income and expenditures, sector (regardless of the one-off influ- or public goods used by the state by ence on the growth of prices), con- using the money of the tax payers. 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 Sincerely, immune, easily adaptive and competi- Igor Lukšić, PhD tive. Without the productivity growth and increase of the production of goods and services the growth of the living standard is not possible.

 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Law Amending and Supplementing Budget Law for 2007 stimation of the receipts and expen- in Health, Education and Culture sector. ditures of the Budget of the Republic While for the others, which are financed Eof Montenegro for 2007 has been from the Republic Budget, this increase will done on the basis of expected growth of start its realization from 1st January 2008. Gross domestic product (GDP) for 2007, i.e. By Amendments and Supplements of planned increase of economic activity, data the Budget Law for 2007, total planned on trend of public spending in the period receipts are 749,09 mil € , which is 132,23 from 2001 to 2006 and current alterations mil € higher amount than the planned one regarding the set of Laws from the sphere from the Budget Law for 2007. of fiscal policy, above all, the Law on Per- Taxes are being planned to the amount sonal Income Tax and the Law on Value of 653,61 mill €, and are 124,91 mill€ high- Added Tax; and on the basis of other regu- er than planned. Personal income tax is lations that govern functioning of Govern- planned to the amount of 73,87 mill € and mental bodies, extra-budgetary funds and it is increased for 7,75 mill €, corporate tax other subjects of the State. The Budget Law is 40,29 mil € and it is increased for 25,26 also includes the capital budget separated mill €, property tax, i.e. capital transfer tax from the current budget, where the most is 14,17 mill € and it is increased for 8,24 important capital projects from 2007, that mill €, value added tax is 369,71 mill € and will be financed from budget funds, have it is increased for 72,57 mill €, excises 85,95 been systematically processed. Projections mill € and it is increased for 6,59 mill €, of the public revenues have been harmo- conditioned better collection of value add- tax on international trade and customs is nized during the preparation of the Draft ed tax, tax on international trade, customs 63,88 mill € and it is increased for 3,21 mill of the Budget Law, with assistance of repre- transactions and excise tax. €, while other taxes of the Republic are sentatives of International Monetary Fund Higher collection of fiscal duties than planned to the amount of 5,75 mill € and and foreign experts for public finances, planned, was one of the reasons for adop- they are 1,27 mill € higher when compared therefore the planned estimations have tion of the Draft Law Amending and Sup- to the amount planned by the Budget Law been tested in several ways. plementing Budget Law for 2007, because for 2007. After the last eight months of 2007, the conditions were met for accelerated Duties are being planned to the it is obvious that economic activity has realization of certain Government econom- amount of 17,52 mill € and this amount exceeded the expectations. On the other ic policy goals for 2007. This, most of all, is lower for 2,61 mill €, when compared to hand, it generated the significantly higher refers to the increase of average income the planned amount. Stamp duties are 9,99 collection of public incomes, compared of the employees in public administration mill € and they are reduced for 4,26 mill to the plan. High growth rate has been and further decrease of the public debt of €, the reason for reduction is postpone- noted in the areas of services – tourism, the Republic in order to reach the level of ment of the personal Ids replacement in trade, real estate, financial intermediation, 30% of GDP until 2010. Also, the increased 2007, and the income based on this was construction industry and traffic. The price pace of activities regarding the most vul- stipulated by the Budget Law for 2007. The of real estates has risen, as well as increase nerable ranks of society has been done, planned amount of court stamp duties is of the real estate business scope, especially through subventions for electricity bills and 7,09 mill € and they are increased for 1,62 at the coastal area and in Podgorica. For- other social benefits as well the increase of mill €, residence taxes are 0,43 mill € and eign net direct investments of the capital the Capital Budget are amongst priorities. they are slightly higher when compared to have increased as well as the employment The growth of the minimal labour cost in the planned amount. rates and average income in the Republic. December 2006 caused a linear increase of Increase of compensations is planed to All of this affected increase of the funds at the average salaries for all employed per- the amount of 21,68 mill € and they are 3,05 the Treasury above the planned level. How- sons in the Republic, which did not reflect mill € higher than planned amount. Com- ever, it is very important to indicate that on the first Budget Law for 2007, since pensations for usage of goods of common activity of the authorities of the Republic it was already one step before adoption interest are 4,33 mill € and it is increased for has increased, especially of the Tax Admin- by the Parliament. Surplus profit earned 2,98 mill €, due to the significantly higher istration and Customs, which resulted in through higher receipts than expenses has collection of compensations for utilities in decrease of the grey economy, suppression enabled further increase of the earnings the first eight months in 2007, compensa- of cigarettes illegal market and additionally (cumulative 30%) of the persons employed tions for usage of natural resources amount

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

2,75 mill € and are 0,48 mill € lower, eco- the employees’ earnings for 20 %, from logical compensations are 2,35 mill € and October. are 0,24 mill € higher, compensations for Costs for material and services has organising games of chance are 4,67 mill increased for 7,0 mill€. Significant increase, € which is 0,65 mill € higher, road fees are amounting to 2,9 mill€ relates to con- 5,40 mill € and they are reduced for 0,46 tracted services (vocational training of the mill €. Other compensations are planned employees, production and maintenance to the amount of 2,18 mill € they are of software, media and promoting activities increased for 0,11 mill €, compared to the etc.). Expenditure for office supply, spare amount planned in Budget Law for 2007. parts and small inventory has increased for Other revenues, according to the revi- 1,9 mill€. The remaining part of the funds sion, are planned to the amount of 34,06 refers to the increase of the expenditure for mill € and they are 18,03 mill € higher the electricity bills to 1,2 mill€, for business when compared to the amount planned in trips amounting to 0,6 mill € and increase Budget Law for 2007. Penalties and expro- of the expenditure resulting from payment priated property benefits are planned to of the phone bills amounting to 0,2 mill €. the amount of 9.98 mill € and they are 1,96 Increase of the funds for current main- mill € higher, revenues made by authorities tenance amounts to 1,0 mill €. Funds for and their activity are 3.57 mill € and they the current maintenance of the buildings are reduced for 0.11 mill €, other revenues are increased for 0.9 mill € and the funds for are 6.55 mill € and they are increased for the current maintenance of the equipment 2.24 mill €; yields on capital are planned to GDP. With the second level of consolida- are increased for 0,09 mill €. be to the amount of 13,96 mill € (the sale tion we come to the total level of public Subsidy funds are increased for 5,0 mill of third license for third mobile provider). spending, 47,12 % of GDP. Estimated cur- € and they refer to the subsidies to the Yields on capital were not planned by the rent public spending (consolidated public Steel plant-Niksic for the cost of electric Budget Law. spending, reduced for total capital expen- power. The commitment results from the Loans and credits from foreign sources ditures – Capital Budget of the Republic Sales Contract on sale of 66,7% of all stocks are planned to be 4,87 mill €, donations of Montenegro, capital expenditures in of the joint stock company, Steel plant- amount to 0,6 mill €, project loans are 4 mill current budget and capital expenditures of Niksic. This Contract provides (Annex No.9) € and revenues from privatisation amount funds and municipalities) in 2007 amounts that Government will participate in the to 8 mill €. 906,55 mill €, which is 42,07 % of GDP for payment of certain quantities of electric Budget surplus is planned to the 2007. power during the durance of investment amount of 90,03 mill €. The surplus result- Estimated surplus of the revenues over period of time, from 2007 until 2011 and ing from the difference between current expenditures in 2007 is 65,78 mill€, which the buyer will invest 117 mill € into the incomes and the expenditures will be used makes 3,05 % of the estimated GDP for Steel plant, during the same period. for financing debt repayment, servicing 2007. Transfers for the social care are of debt from previous years (including Surplus of the funds earmarked for the increased for 3,5 mill €. This increase result- old foreign currency savings) and Capital current budget amounts 131,2 mill €. ed from the extension of the rights and Budget. Methodologically, due to the sug- Funds for gross earnings of the employ- increased number of the beneficiaries of gestions of International Monetary Fond ees have been increased for 20,2 mill €, as a the child benefits, veterans and disabled and in accordance with statistics of the result of the Draft Law on Budget. As it was persons’ benefits, family benefits, maternity public sector (Government Finance Statis- mentioned before, the increase resulted leave, professional care and support to the tics), repayment of budget call in arrears from the raise of the minimal wage, that funds needed for canteen meals in kinder during 2007 has been presented as debt amounted to 52.00€ in the first quarter, gardens. repayment; i.e. as liability that is repaid after in the second quarter to 53.00€, and in Transfers to the institutions, individ- affirmation of budget surplus or deficit, the third and forth quarter it amounts to uals, NGO and governmental sector are which was specially notified in each report 55.00€. In addition, the increase resulted increased for 5,3 mill €. This increase refers of the Ministry of Finance. In the case from application of following regulations: to the increase of funds for 1,9 mill €, need- of considering those liabilities as current The Law on Earnings and Other Incomes ed for broadcasting signal of the National expenditure, the surplus would be reduced of the Appointees of Juridical, Court and TV of the Republic of Montenegro on the for the amount of those liabilities. Constitutional Positions, that provides for territory of Montenegro; to the increase of Total public revenues for 2007 are esti- the increase of earnings from Septem- funds for 1,4 mill €, needed for the reali- mated to the amount of 1.122,63 mill€, that ber; Amendments and Supplements of zation of sport programs; to the increase makes 52,09 % of GDP for 2007 (2.155,00 the Branch Collective Contract for health of funds for 0,8 mill € for overcoming mill €) . Taxes have the biggest share in and social sector, which provides for the the problems regarding the collection of the structure of public revenues – 719,73 increase of the employees’ earnings for radio and TV subscription as well as to the mill € or 33,4 % of GDP, then contributions 30 %, from September; Amendments and increase of funds for 0,5 mill €, needed for – 257,27 mill € or 11,94 % of GDP. Taxes Supplements of the Branch Collective the increase of earnings for the employed amount to 64 % of total public revenues, Contract for the education sector, which at the University of Montenegro. contributions amount to 23 % while other provides for the increase of the employ- Capital expenditures are increased revenues make 13 % of total public rev- ees’ earnings for 20 %, from October and for 9,1 mill €. Expenses on construction enues. Amendments and Supplements of the objects are increased for 3,5 mil.€; costs Estimated public spending in 2007 Branch Collective Contract for the culture for investment maintenance are increased amounts 1.056,85 mill €, or 49,04 % of sector, which provides for the increase of for 2,4 mill €; costs for the equipment are

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

increased for 1,7 mil.€ and the costs for 2007. In all credit arrangements, except the Ministry of Finance considers that, first local infrastructure are increased for 1,5 contract with IDA and European Invest- of all, surplus should be used for strength- mil.€. ment Bank (EIB), the Government of the ening of reserve funds, i.e. State deposits The funds for repayment of debts are Republic of Montenegro (Government) will for the future period of stabilization or significantly increased, and they amount act as a guarantee to the end-users of reduction of tax revenues. Those reserve to 68,9 mill€. For repayment of bonds credit funds. In arrangements with IDA, funds will be used for meeting the current and credits of non-residents, the funds are a special contract will define the relation expenses in the following years instead increased for 47,8 mill€; for repayment of between the Government and the end- of making external debts accumulation liabilities from previous years, the funds are users of the funds, Electric Power Industry in order to finance public expenditures. increased for 15,1 mill€ and for the repay- of Montenegro, Public Enterprise Region- In addition, it may be used as a collateral ment of bonds and credits of residents, the al Water Supply System for Montenegrin for construction of capital infrastructure funds are increased for 5,9 mill€. We are coastal area and Municipal Assembly of projects in Montenegro, whether the work talking about premature debt repayment Ulcinj. In addition, the resumed signing of will be done independently or with strate- to the World Bank, that amounts 39 mill€; the contracts credited by EIB, that were first gic partners. Secondly, surplus should be regular repayment of obligations resulting signed during the existence of the state used for debt repayment. Thus, the partici- from old foreign currency savings; regular Serbia and Montenegro and which refer to pation of public debt in GDP is reduced but repayment of foreign credits; payment of the projects in Montenegro, is anticipated. the credit expansion of commercial banks initial quota for membership in Interna- Specifically, there are 13 mill € that have is also sterilized, that, together with deficit tional Monetary Fund and World Bank; not been drawn; 4 mill € for the Recovery of the balance payments represents the so repayment of the budget call in arrears of Road Network Project, 1 mill € for the called «dangerous» side of the rapid eco- and repayment of the obligations based on Reconstruction of the Airport Project, 5 mill nomic development. The third possibility effective court decisions, which represents € for the Regulation of Liquid Waste and is to use deposits as a base for the further a significant amount in 2007. Improvement of Energy Sector Project. reduction of direct taxes, in order to make The funds of the current budgetary Out of these signed credit arrange- the business environment as stimulating as reserve are increased for 4,0 mill €. Those ments in 2007, the funds intended for the can be for further economic activities and funds will be used for contingent expenses, Budget of the Republic and that will be continuation of foreign investments. until the end of 2007. withdrawn during 2007 are the funds for If the existing surplus continues to gen- Credit under OECD conditions was the Recovery of Road Network EIB Project erate additional current public expenditure signed with the Government of the Repub- and they amount to 4 mil. €. in the following years, inflation can start lic of Hungary in 2005. This credit implies Based on realized public revenues and and this would undermine the balance favourable interest rate, under the market expenditure in 2007 and taking into con- of macroeconomic aggregates – supply level and long repayment period. The sideration the entire economic situation and demand of goods, services, currency. funds are used for construction of the in Montenegro, the following conclusions Therefore, one of the priorities of the Min- educational institutions in Podgorica, Gym- can be drown: istry of Finance and the Government of nasium building, Economic high school According to the evaluation of Ministry Montenegro is further maintenance of the and building of Medical high school. Total of Finance, the growth of tax revenues as achieved macroeconomic stability in Mon- amount of the credit is 15 mill € and so it was in 2006 and during the first eight tenegro. Increase of the earnings, realized far in 2007, 4,6 mill € has been withdrawn. months of 2007, is not sustainable in a long or planned, that amounts to 30%, has used Specific quality of all credits under OECD term period. After the investment boom up further growth until 2010, any more arrangements is that funds are directly that started in the second half of 2005 significant amount at least, except for the transmitted to the suppliers, i.e. contrac- and which has lasted in 2006 and the first harmonization with the rise of inflation tors; therefore they cannot be shown in the eight months of 2007, with trend of con- rate. Public expenditure will be probably legal part of the budget. tinuation during the most part of 2008, it is burdened with additional expenses, such During 2007, including August 31st, realistic to expect the stabilisation of eco- as necessary growth of the diplomatic- credit arrangements have been signed nomic activities when the certain reduc- consular representative bodies network; with affiliation of the World Bank, Interna- tion of certain tax revenues is expected. capacity building of official administration tional Development Association (IDA), for This, primarily, refers to value added tax, towards becoming a member of Europe- the Energy Sector Development Project, which makes more than half of total cur- an Union; strategic infrastructure projects, that amounts to 6,75 mil. €; for Sustainable rent revenues of the budget; and the cus- above all, the construction of the high- Tourism Project; for regional water supply, toms revenues, that amount to nearly 9% way Bar-Boljare, but also others, not less that amounts to 7,5 mil. €, (original cur- of the current revenues. Therefore, more important projects related to water supply, rency of the loan is special drawing rights than 60% current budget revenues directly disposal of liquid waste, construction of – SDR). Credit arrangement was also signed depend on dynamic of economic activities, up-to-date waste dump; construction and with German bank (KfW), for the Energy i.e. on investment boom in Montenegro. maintenance of the national road network. Sector Development Project, that amounts On the other hand, the difference between Great needs also point out the necessary 5,4 mill EUR. Until the end of 2007, the sign- the receipts and current revenues, results caution in planning budget funds in the ing of third phase of the project Regional from one-off property sale revenues, loans following years, as well as in determining Water Supply System and Liquid Waste and credits. All this confirms the fact that the sustainable investment and in spend- with KfW bank is anticipated, and it will any long term commitments in medium or ing the funds. amount to 4,5 mill €, Project of the Recon- long term, made on the basis of accumu- struction of the Railway Infrastructure with lated revenues in 2007, would cause the European Bank for Reconstruction and deficit of the Budget of the Republic in a Development (EBRD), that amounts to 6,0 near future, with all negative side-effects of Nikola Vukićević MA mil. € is also anticipated until the end of this kind of situation. ASSISTENT TO the MINISTER

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

From the Journalist’s point of view:

UNPRECCEDENTED BUDGETARY SURPLAS AS A STEP FORWARD REGARDING THE INFRASTRUCTURAL PROJECTS Measure Twice Before You Cut The 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.

The Draft Law Amending and Beside this, all economists agree that Supplementing the Budget Law indicates the surplus indicates the moment of invest- some softening of the initial attitude, since ment boom and mass property sale and it suggests the increase of expenses for that this moment should be wisely used, around 57 million euros (the biggest part since it will not last forever. refers to the earnings increase), while less The fact that the Republic did not than one sixth of the entire amount is give in under the pressure of unplanned intended for the social care. Social care is income like many Montenegrins who sold mostly increased due to the including of their inherited land to foreigners (although the previously announced programme of the salaries in public salaries have been the subvention of the part of electricity bills increased), encourages the hope that for poor households. This amount of Budget the same precaution, based on the prin- uring hot August days, beside dis- surplus was not enough to prevent the step ciple ‘measure twice, before you cut’, will cussions among different parties backwards of the social policy. Therefore, be applied for the choice of infrastruc- Don Constitution (probably the only beside the decrease of the number of ture projects that would solve outstanding remaining issue that gives room for debates households that will receive some help for problems in tourism and other branches in media, within the range of well rehearsed paying the electricity bills and ‘cutting’ the connected to it. Therefore, we are eagerly national rhetoric, there was one unexpect- bills from 20 to 11,2 euros a month, it was anticipating a plan for possible investments edly good news – Republic budget, instead decided to reduce the scholarships for the and its profit investment. of deficit, in seven months has accumulated children who were in the ‘train of death’, in Creating high quality infrastructure 117 million euros of the surplus. January 2006. In addition, it was decided base (roads, water supply, electricity...), with In the light of the fact that there has that the former owners of expropriated investment increase in science, education not been any significant sale of the state property during the socialism, will receive and improvement of health services would property, and that budget revenues are sig- less reimbursement than it was originally be a big step forward a steady economic nificantly higher than the one from last year, planned. development of a legal country that sup- this data seems as even bigger success. A critic on duty would notice that at ports business and it would stop to an end Almost 98 million euros more than the same time, the Government decided to the migration of the citizens to the south of planned amount of taxes was collected. approve five million euros of subvention for the Republic, that has lasted for decades. Naturally, VAT had the greatest impact on electricity bills to the privatized Still plant In this scenario, that does not have to that result and the biggest surprise for the and to help Afghanistan, the country that be utopian, even the people from the mar- planners were corporate tax and property produces around 90% of the entire world gin (who live in a larger half of Montenegro, tax, since the amount collected on these opium production, by sending it 1.500 auto- if we take in consideration the size of territo- taxes was three times bigger than it had matic rifles, 100 machine-guns and 250.000 ry) would bear more easily ‘painful transition been estimated. bullets. cuts’, because they would have something Revived hopes that the Republic will An optimist on duty would neglect to hope for. be generous to the poor and increase the the above mentioned unpopular moves, social care, came to an abrupt end since it because restrain from expenses increase turned out that the Republic will become and repayment of foreign debts, give room even more tight-fisted when it comes to to the Republic to solve a big part of social Dragana Crvenica this issue. problems in a long term period. Journalist of the daily “Vijesti”

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

Law Amending and Supplementing Budget Law for 2007 - Capital Budget

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 Economic Description Plan 2007 Difference Revision classification classification

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

Functional Economic Description Plan 2007 Difference Revision classification classification

Musical Centre – Reconstruction 721 and Renovation of the Army Home 3,184,200.00 -2,500,000.00 684,200.00 facility in Podgorica 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-

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

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 Functional Economic description Plan 2007 Difference Revised classification classification

Head office of the Custom house Kotor- 709 332,000.00 100,000.00 432,000.00 Kotor

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 8,700.00 413 Costs for material and services 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 O112 4139 Contracted services 7,000.00 0.00 7,000.00 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 Functional Economic Description Plan 2007 Difference Revision classification classification

Prison for Minors, Prison for Women and 711 500,000.00 350,000.00 850,000.00 Emergency Prison for Foreigners

7111 Preparation phase 0.00 16,260.00 16,260.00 7112 Construction phase 483,740.00 350,000.00 833,740.00 4 Costs 483,740.00 350,000.00 833,740.00 41 Current costs 5,110.00 0.00 5,110.00 413 Costs for material and services 5,110.00 0.00 5,110.00 O340 4131 Costs for material 50.00 0.00 50.00 O340 4135 Costs for phone services 60.00 0.00 60.00 O340 4139 Contracted services 5,000.00 0.00 5,000.00 44 Capital expenditures 478,630.00 350,000.00 828,630.00 441 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

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

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

Functional Economic Description Plan 2007 Difference Revision classification classification

Department for Prison Sentencing of up to 6 712 Months and Sentences to Prison Pronounced in 500,000.00 350,000.00 850,000.00 the Offence Procedure 7121 Preparation phase 18,260.00 0.00 18,260.00 7122 Construction phase 481,740.00 350,000.00 831,740.00 4 Costs 481,740.00 350,000.00 831,740.00 41 Current costs 6,110.00 0.00 6,110.00 413 Costs for material and services 6,110.00 0.00 6,110.00 O340 4131 Costs for material 50.00 0.00 50.00 O340 4135 Costs for phone services 60.00 0.00 60.00 O340 4139 Contracted services 6,000.00 0.00 6,000.00 44 Capital expenditures 475,630.00 350,000.00 825,630.00 441 Capital expenditures 475,630.00 350,000.00 825,630.00 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 Functional Economic Description Plan 2007 Difference Revision classification classification

Reconstruction of the administrative building “ 722 0.00 651,800.00 651,800.00 Vukman Kruščić” Mojkovac

7222 Construction phase 0.00 651,800.00 651,800.00 4 Costs 0.00 651,800.00 651,800.00 44 Capital expenditures 0.00 651,800.00 651,800.00 441 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 €.

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

Reconstruction of the school centre « Tvrtko Bijelić » - Nikšić Functional Economic Plan Description Difference Revision classification classification 2007 Reconstruction of the school centre 723 0.00 548,200.00 548,200.00 “Tvrtko Bijelić” Nikšić 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 10,000.00 O922 4139 Contracted services 0.00 10,000.00 10,000.00 7232 Construction phase 0.00 538,200.00 538,200.00 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 12,000.00 O922 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 0.00 526,200.00 526,200.00 O922 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 Traffic Functional Economic Description Plan 2007 Difference Revision classification classification 660 Directorate for Traffic 18,000,000.00 1,500,000.00 19,500,000.00

Road Risan – Grahovo – Žabljak Functional Economic Description Plan 2007 Difference Revision classification 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 3,600.00 413 Costs for material and services 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 Expenditures for infrastructure of 0451 4411 6,996,400.00 3,000,000.00 9,996,400.00 common interest

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

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 Functional Economic Description Plan 2007 Difference Revision classification classification Mišići - Buljarica over the saddle 718 3,000,000.00 -2,000,000.00 1,000,000.00 Kufin 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 Costs for infrastructure of O451 4411 3,000,000.00 -2,000,000.00 1,000,000.00 common interest

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

Functional Economic Description Plan 2007 Difference Revision classification classification

Construction of the highway from 724 0.00 500,000.00 500,000.00 Smokovac to Veruša 7242 Construction phase 0.00 500,000.00 500,000.00 4 Costs 0.00 500,000.00 500,000.00 44 Capital expenditures 0.00 500,000.00 500,000.00 441 Capital expenditures 0.00 500,000.00 500,000.00 Costs for infrastructure of common O451 4411 0.00 500,000.00 500,000.00 interest

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

16 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Program Budgeting in the 2008 Budget

rogram Budgeting is a modern strategic form of budget- ing operating in over 72 percent of countries worldwide. PImplementing 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. and where necessary to refine of the current program structures The introduction of Program Budgeting requires a change in and performance indicators to ensure there is a clear link between the operational culture of most Budget Users from one of adminis- the Government of Montenegro’s Economic policy document and tration and control to one of managing performance that is results other strategic development plans. orientated in terms of program impacts. Program Budgeting is The 2008 Budget Circular contained a number of important also a more costly and far more complex form of budgeting than advancements from the previous year’s circular in terms of the the traditional form of Line Item Budgeting that still operates in depth of guidance and instructions for the development of the Montenegro where funding is allocated in the Budget to cover the non-financial data for Program Budgeting. cost of inputs for delivering government services, such as expen- The Ministry of Finance with the assistance of USAID/Bearing- ditures for salaries, contributions, business trips, postage services, Point staff conducted 14 workshops for Pilot Budget Users in the phones services etc. first week of September 2007. In preparation for these workshops, Montenegro has decided to adopt such budget concept and Budget Users received a brief report that focused on the key areas therefore commenced Piloting Program Budgeting in the 2004 that need to be addressed in preparing their 2008 Budget submis- Budget with two Budget Users, which has increased annually to a sions. This is a significant positive change of practice with the Min- total of 15 in the 2007 Budget (15% of the total number of Budget istry of Finance now being actively involved in assisting Pilot Users Users). improve the Performance Program Budgeting information based In January 2007 the Ministry of Finance decided to undertake on best international practice. This hands-on assistance to Budget an evaluation to analyze the results achieved so far from Program Users has continued with USAID/BearingPoint staff providing sug- Budgeting and to utilize the experiences of other countries to pre- gested improvements to the Budget Users submissions and work- pare a future implementation strategy and to prepare a detailed ing with them to bring the performance information in line with County Action Plan to capture the specific outcomes expected of international practices. this reform. This article will outline the progress made in imple- A noticeable difference of the 2008 Budget Rationale will be menting the reforms of the Country Action Plan in 2007. an improved layout. It is in a user-friendly format that captures the The USAID/BearingPoint project has provided significant tech- key activities, objectives and performance data for each budget nical assistance to the Ministry of Finance lead review of the effec- user. Performance indicators are also a far more balanced repre- tiveness of Program Budgeting and the drafting of the report. It sentation of the performance of the organization. Previous years was an excellent result for the Ministry of Finance that the Govern- Budget Users focused on what goods and services they intended ment of Montenegro approved the review’s recommendation to to deliver but in the 2008 Budget this has been balanced with in- continue on the path to fully implementing Program Budgeting dicators also measuring how efficiently and effectively these -ser through the adoption of a Country Action Plan that is based on vices will be delivered. a staggered implementation approach over the next three years. Finally, one of the key activities aimed at the strengthening the The Action Plan contains a comprehensive set of tasks, timelines high level commitment of the senior Government officials to the and responsibilities for the Ministry of Finance, Budget Users and ongoing implementation of Program Budgeting will be a high lev- State Audit Institute. el presentation by the Minister of Finance to Senior Government One of the key recommendations of the review was to rectify officials and representatives from the donor community onthe the current deficiencies with the current Budget Users and systems findings and recommendations from the Program Budgeting Re- prior to developing Program Budgeting for any new Budget Users. port, and government approved strategic framework for the way The exception to this has been the inclusion of Program Budget- forward for Program Budgeting in Montenegro. ing for the Ministry of Finance, where they can see the benefits Dean Brown from operating in a more outcome focused environment. USAID/ Senior Budget Advisor BearingPoint has been working with MoF and Budget Users review USAID/BearingPoint

17 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Inclusion of Extra-Budgetary Funds into the State Treasury System rovisions of the Article 25 of the involved in the work of Work group and Budget Law («Official gazette of the they will contribute to the achievement of PRepublic of Montenegro, No. 40/01, such project that will in no way disarrange 44/01 and 71/05) stipulate that Ministry of reforms in the field of Public Finance or Finance can suggest to the Government have any negative effect on the function- a special programme which will include ing extra-budgetary funds. receipts and expenditures of extra-budget- The Work group has conceived the ary funds into the Consolidated Account of Legislation that defines competence and the Treasury and plan them as an integral work of funds, structure of extra-budgetary part of the Budget of the Republic. receipts and the way of their usage in terms In accordance with these competenc- of including funds into the Treasury System, receipts and expenditures and way of their es, the Minister of Finance has formed in order to provide the legal definition of the usage in terms of inclusion the extra-bud- a Work group consisting of representa- revenues (so that all revenues of funds are getary funds into the Treasury system, is tives of the Ministry of Finance and of all used for financing of their activity). essential for the realization of this project. funds. The task of the Work group is to Revenues of Funds will be treated as Therefore, it was suggested that solu- consider all the possibilities and to sug- earmarked revenues and they will serve tions given in System Laws: gest to the Government the most optimal exclusively for financing of costs of funds. - Law on Pension and Disability solution - Programme for Inclusion of Extra- The missing funds will be provided out Insurance (Official gazette of the RoM», No. Budgetary Funds into the State Treasury of general revenues (current transfers to 54/04, 39/04 and 79/04); System, of the following: fund). In addition, funds will be directly - Law on Health Insurance («Official - Pension and Disability Insurance Fund included in the Information System – SAP, gazette of the RoM», No. 39/04); of the Republic, that is used by the Treasury of the Republic, - Law on Employment («Official gazette - Health Insurance Fund of the therefore, everyday access to all the chang- of the RoM», No. 5/02, 79/04 and 29/05); Republic, es of the positions will be available. - Law on Development Fund of the - Employment Agency of the Republic The structure of the extra-budgetary Republic of Montenegro («Official gazette of Montenegro, expenses is defined in accordance with the of the RoM», No. 46/92); - Development Fund of the Republic of Book of Rules on Unique Classification of - Law on Restitution of Expropriated Montenegro and Accounts for the Budget of the Republic, Property Rights and Compensation («Offi­ - Compensation Fund. Budgets of Extra-budgetary Funds and cial gazette of the RoM», No. 21/04) The Project represents the continu- Budgets of Municipalities («Official gazette - and their bylaws, that refer to the ation of the reforms in the system of the of Republic of Montenegro, No. 37/05 and issue of financing and way of adopting of Public Finance; therefore the suggestions 81/05) and in accordance with of funds financial deeds of extra-budgetary funds, provided in the Project must have the fol- needs, in order to provide the most ade- should be governed by the Law Amending lowing positive effects, at least: quate accounting records. If it is found and Supplementing the Budget Law. - more efficient cash management and necessary, for funds’ analytical monitor- The Ministry of Finance has pre- improved liquidity of the Budget of the ing of the expenditure by the funds, an pared the Draft Law Amending and Republic as well as of the extra-budgetary Amendment to the existing Book of Rules Supplementing Budget Law, established funds; will be made. For internal accounting and submitted to the Parliament by the - Reduction of the State costs on the records, funds will apply existing solutions Government for consideration and adop- basis of interests on credits and banking until the adoption of the new Book of tion. Suggested amendments and supple- commissions; Rules, in which the solutions will be imple- ments of the Budget Law, in the part that - Higher accuracy and efficiency of mented that will adequately satisfy the refers to extra-budgetary funds, were used the consolidated reporting through more need of all users. to readjust the legislation in accordance efficient processes of collection of public It is estimated that detailed studying with newly arising conditions. revenues and payment of liabilities of the and analyzing of the existing legislation Republic . that defines competences and work of Stanimirka Mijović The experts of USAID and EU are also funds, financing issue, i.e. structure of the Independent Advisor

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

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

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. Fnished survey Planned survey AIM OF THE PROGRAMME Not surveyed

Aim of the Programme is defined in accordance with the done: new functional solutions from the Law, according to which for 1) Establishment of the state referent geodetic systems in area of the Republic of Montenegro the following should be accordance with the needs of the Republic in cooperation with

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

necessary technologic connections with European reference feasibility, b) level of the determined technical standards. systems and their standards; 2) Forming of the real estates cadastre on unsurveyed parts Basic sub-programmes which will be realised in the medium- of the Republic of Montenegro and perform completion of term period are: existing data base of geodetic-cadastral data; 3) Forming of the cadastre of pipelines in all larger places Establishment of the State Reference Geodetic Systems as a unique and public record on pipelines and underground (Basic Geodetic Operations) objects and rights on them; 4) Making of the Basic State Map, topographic and review- Programme of works on establishment of state reference topographic maps and forming of the unique cartographic data geodetic systems of the Republic of Montenegro has derived base of the Republic; from needs for creating of the modern mathematical base at the 5) Realisation of survey, marking and renewal of border global and local level which serves for positioning, determining marks on the state border, preparation of documents regarding of the outer gravity field and geodynamic researches, for needs the state border, forming of record on state border, and of the state survey, forming of informational system of the establishment of the service for its maintenance. Republic with the European reference systems, and reference 6) Forming of the registers of home numbers, streets and systems of the countries in the region: squares and register of space units; 7) Continuation of the activities on modernisation of existing Program of Works encompasses: geodetic-cadastre information system, and to have all data regarding the territory of the Republic of Montenegro, holders • Realisation of the Space reference system in the form of real estate rights and other real rights provided in the digital of the space reference base of the Republic of Montenegro form with the most objective accuracy and reliability and to be (maintenance and upgrading of the permanent stations available for all interested legal and natural persons at any place network, thickening of the GPS networks). Planned funds for and any time; realisation of works amount around 275.000 €. 8) Continuation of activities on land territory regulation by - Creation of the new horizontal reference system agrarian regroupment; (trigonometrical, polygon and town trigonometrical network). 9) Performing of reorganisation of the Real Estate Funds planned for realisation of works amount around Administration, modernisation and construction of area of Real 700.000 €. Estate Administration and regional units for real estate cadastre - Creation of the vertical reference system (network of and improvement of services on operations of conservation of levelling of high accuracy NTV2, town levelling networks). Funds the real estate and issuance of data; planned for realisation of works amount around 785.000 €. 10) Establishment of modern archives of documentation on - Forming of the gravimetrical reference system (basic state survey and real estate, and to establish modern system for gravimetrical network and gravimetrical survey). Funds planned protection of data; for realisation of works amount around 95.000 €. 11) TAdoption of new and innovation of existing bylaws in - Determining of the geoid of Montenegro. Funds planned the sphere of state survey and real estate cadastre in accordance for realisation of works amount around 105.000 €. with the Law; - Horizontal and vertical connection of the existing and new 12) Modernisation of the education system of personnel state reference base. Funds planned for the realisation of works for working on jobs of state survey and real estate cadastre amount around 135.000 €. (geodetic, legal, informatical and agricultural). Establishment of the Real Estate Cadastre on Unsur- PROGRAMME SOLUTIONS veyed Areas in Which Cadastre and Registration of Land is Applicable and on Unsurveyed Parts in Which the Inventory Programme will be realised through special sub programmes, Cadastre is Applicable which are determined on the base of the Law and whose scope and funds are determined based on the stated documents and Programme of Works refers to: requests from users, and their rationality in compliance with the following: • Establishment of the real estate cadastre in areas where • Economic and development criteria which are considered cadastre of land is applicable- on the territory of 22190 ha and from the point of: a) economic feasibility b) developmental in 25CM (Bijelo Polje, on the territory of 4005ha and 10CM; influence; Mojkovac, on the territory of 1053ha and 2CM, Nikšić, on the • Financial criteria considered from the point of: a) height of territory of 15101ha and 11CM and Ulcinj, on the territory of investment, b) Cost-benefit analysis c) degree of provided funds, 1031 and 2CM); d) possibility of participation of funds of local self-government • Establishment of the real estate cadastre in unsuvreyed areas and public enterprises in the realisation of the project; of the Republic, i.e. cadastral municipalities, where inventory • Criteria of the influence on the environment; cadastre is applicable- on the territory of 252.963 ha in 90CM • Technical criteria considered from the point of: a) technical (preview of planned works is given in the following tables);

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

Preview of planned works in 2008 Surface CM Number of the Number of the Number of Number of deeds of Ordinal Cadastral municipality (ha) cadastral parcels cadastral cultures objects land 1. Municipality Podgorica 1. Cvarin 755 470 1.197 53 131 2. Vrbica 688 710 1.509 84 174 3. Medun 643 529 1.277 59 127 4. Fundina 1.869 1.091 2.621 179 254 5. Trmanje 2.041 1.272 2.768 27 134 6. Rijeka 3.403 1.469 3.069 55 156 7. Bioče 1.417 1.052 2.451 110 211 8. Lutovo 2.305 776 1.901 28 62 9. Klopot 482 159 357 38 47 10. Bolje Sestre 1.583 581 1.781 92 137 11. Prelev Brijeg 1.807 700 1.488 101 159 12. Grbi Do 555 383 765 36 65 13. Duške 1.064 783 1.295 87 158 14. Slacko 949 215 602 53 81 15. Lopate 655 573 962 43 98 16. Veruša 1.030 698 1.366 121 326 17. Stupovi 1.054 407 1.513 56 91 18. Opasanica 6.000 503 1.457 79 151 19. Trebišnica 1.766 641 1.514 44 112 20. Lijeva Rijeka 533 492 845 60 91 21. Donje Stravče 1.034 456 1.245 46 66 22. Brskut 2.719 2.009 4.150 304 309 23. Ubli 2.820 2.750 6.473 398 571 24. Bezijevo 860 823 1.772 110 141 25. Momče 1.618 879 1.828 120 151 26. Donji Zatrijebač 1.285 752 1.709 85 133 27. Gornji Zatrijebač 3.531 600 1.236 116 248 28. Dinoša 2.402 1.738 3.008 253 440 29. Koći 1.189 665 1.418 104 117 30. Kržanja 1.780 1.264 2.361 160 248 TOTAL: 49.837 25.440 55.938 3.101 5.189 Preview of planned works in 2009 Number of Surface CM Number of the Number of Number of deeds of Ordinal Cadastral municipality the cadastral (ha) cadastral parcels objects land cultures 1. Municipality Cetinje 1. Trešnjevo 3.293 828 2.324 108 164 2. Kobilji do 6.407 1.035 4.367 134 223 3. Ubli 5.963 685 2.418 151 226 4. Lastva 4.018 529 2.129 94 139 5. Prentin do 4.081 924 2.889 124 201 6. Bata 4.134 1.565 3.080 191 228 7. Čevo 3.409 1.184 3.307 161 245 8. Markovina 1.690 410 1.379 54 85 9. Velestovo 3.225 586 2.129 105 174 10. Prediš 3.876 1.147 3.026 148 191 11. Grab 2.477 2.053 3.993 158 224 12. Resna 1.500 859 1.834 91 113 13. Ćeklići 5.814 5.715 11.928 280 552 14. Štitari 1.384 935 2.826 110 170 15. Đinovići 3.399 1.696 4.549 179 355 TOTAL: 54.670 20.151 52.178 2.088 3.290 Preview of planned works in 2010 Surface CM Number of the Number of the Number of Number of deeds of Ordinal Cadastral municipality (ha) cadastral parcels cadastral cultures objects land 1. Municipality Nikšić 1. Bijela Gora 3.413 280 614 7 134 2. Grahovac 1.930 609 2.199 100 137 3. Grahovo 5.391 2.156 5.287 246 558 4. Jabuka 2.861 385 2.087 70 142 5. Nudo 1.455 774 2.245 115 211 6. VIlusi 6.406 1.590 6.849 210 385 7. Zagora 1.350 201 1.056 34 70 TOTAL: 22.806 5.995 20.337 782 1.637 2.Municipality Podgorica 1. Hoti 3.508 1.791 5.240 233 392 2. Stari Trabujin 1.740 441 1.128 78 129 3. Gruda 1.614 855 2.176 133 224 4. Budza 1.642 576 1.352 101 160 5. Orahovo 5.445 2.262 5.797 315 347 6. Gornje Stravče 13.480 498 1.111 49 197 TOTAL: 27.429 6.423 16.804 909 1.449

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

Preview of planned works in 2011 Surface CM Number of the Number of the Number of Number of deeds of Ordinal Cadastral municipality (ha) cadastral parcels cadastral cultures objects land 1. Municipality Berane 1. Azanje 1.223 1.910 11.648 120 903 2. Bastahe 420 829 3.022 43 318 3. Bubanje 727 1.217 1.088 92 93 4. Buče II 1.719 884 1.767 5 224 5. Vinicka II 804 377 1.116 3 282 6. Vrbica 2.452 2.831 3.600 249 384 7. Vuča 1.018 1.580 1.813 40 406 8. Glavica 793 3.037 939 76 152 9. Dobrodolje 689 536 2.309 68 307 10. Zaostro 1.670 3.483 4.608 186 452 11. Zagrad 698 1.340 4.275 49 631 12. Javorovo 2.575 1.166 4.877 119 386 13 Kurikuće 4.121 3.994 1.926 96 399 14. Lubnice 3.406 3.303 13.752 169 1.596 15. 730 1.645 693 227 72 16. Polica 6.118 9.003 1.779 762 161 17. Praćevac 605 538 924 42 85 18. 1.969 2.424 3.277 274 523 19. Ruišta 613 742 2.710 25 303 20. 3.847 1.752 3.364 147 564 21. Skakavac 291 584 3.071 26 415 22. 2.721 2.140 458 245 139 23. 1.061 1.814 4.830 157 634 24. Crni Vrh 1.630 2.754 1.931 123 297 25. Štitari 780 1.940 1.543 124 111 TOTAL: 42.680 51.823 81.320 3.467 9.837 2.Municipality Mojkovac 1. Bjelojevići 4.203 799 1.714 78 308 TOTAL: 4.203 799 1.714 78 308

Preview of planned works in 2012 Surface CM Number of the Number of the Number of Number of deeds Ordinal Cadastral municipality (ha) cadastral parcels cadastral cultures objects of land 1. Municipality Andrijevica 1. 883 547 1.187 62 146 2. Dulipolje 718 895 2.467 161 214 3. Zabrđe II 3.050 1.389 1.507 2 471 4. Jošanica 4.525 1.052 2.653 113 287 5. 680 728 1.360 108 232 6. Oblo Brdo 1.052 768 1.523 80 126 7. Sjenožeta 632 462 879 47 108 8. Slatina II 1.302 1.045 1.257 15 222 9. Trešnjevo II 1.479 640 930 0 267 TOTAL: 14.321 7.526 13.763 588 2.073 2.Municipality Žabljak 1. Crna Gora 4.010 1.650 3.194 84 221 2. Motački Gaj II 839 1 3 0 1 3. Pašina voda II 1.768 186 377 11 74 4. Tepca 2.802 912 1.688 91 251 5. Žabljak II 1.201 3 13 0 1 TOTAL: 10.620 2.752 5.275 186 548 3.Municipality Bijelo Polje 1. Bistrica 1.087 1.484 2.172 190 409 2. 1.732 1.446 2.288 169 402 3. Goduša 1.554 1.254 1.823 134 332 4. 1.570 1.402 2.215 166 368 5. 577 841 1.046 57 119 6. Ivanje 1.355 1.354 2.075 141 287 7. Korita 8.603 3.040 6.457 267 619 8. Kostenica 1.124 1.067 1.631 121 252 9. Kradenik 655 718 1.148 99 239 10. Lozna 1.303 1.532 2.253 164 341 11. 1.173 1.125 1.435 86 158 12. Negobratina 782 350 621 24 95 13. Pećarska 1.653 1.891 2.949 212 410 14. Radulovići 436 471 727 50 116 15. Sipanje 513 374 574 36 133 16. Srednje Brdo 1.635 723 1.636 72 182 17. Crniš 645 545 836 57 137 TOTAL: 26.397 19.617 31.886 2.045 4.599

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

For realisation of the Programme on design of real es- digital form based on the new air-filming. Value of these works tate cadastre on areas where land cadastre is applicable and is 5.178.282 EUR. unsurveyed parts of the Republic where inventory cadastre is applicable, planned funds amount 21.629.823 EUR (in 2008 - For drafting and updating of the remaining topographic and 4.226.893 EUR, in 2009 - 4.756.910 EUR, in 2010 - 4.018.800 EUR, review-topographic maps of Montenegro, funds are planned to in 2011- 4.520.180 EUR, in 2012 - 4.107.040 EUR). 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. Works on Modernisation of the Cadastre of Coastal Zone Management Survey, Marking and Renewal of Border Marks at the State Works on modernisation of the cadastre of coastal zone Border and Forming of the Record on the State Border management encompass: marking of the borders of the coastal zone, determination and marking of new parcels, filming of the Montenegro has inherited the part of the border of the border and the parcels of the coastal zone and collecting of data former SFRY with Albania, while adequate defining of border on their position, shape, surface and holders of rights, digital with other neighbours is not finished. Total length of the State processing of filming data, corrections of wrong entries and border is: with the Republic of Croatia 41,7 km (land - 19,7 and presentation of data on cadastre to the public and updating of sea - 22), with the Republic Bosnia and Herzegovina 254,4 km the data form the real estate cadastre. (land - 204,5; rivers: Piva, Tara and Ćehotina - 38,2; and Bilećko For realisation of the Programme of modernisation of the Lake - 11,7), with the Republic of Albanija 207,2 km (land - 113,3; real estate cadastre of the coastal zone management, funds are sea - 22; Skadar Lake - 38,8; and rivers: Grnčar, Cijevna, Bojana planned to the amount of 310.000 EUR. 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 Establishment of the Cadastre of Pipelines Kosovo (land - 72,4; and rivers: Lim, Šekularska rijeka and Pećka Bistrica - 3,2 km) and at the open sea 93 km. At the area of the Republic, according to incomplete Recent works on survey, marking, maintenance and renewal data, about 9000 km of underground lines were built: of the border marks at the state border and keeping files of the telecommunications– 2900 km, water supply – 2200 km, faecal state border were performed by the former Ministry of Foreign sewerage – 500 km, atmospheric sewerage – 300 km and Affairs of the State Union Serbia and Montenegro, and after that electric lines – 3100 km. Ministry of internal affairs and public authorities. Programme planned forming of the new records of the Programme of Works refers to: state border and the special sector for execution of works on • Establishment of the cadastre of pipelines in municipalities survey and maintenance of the state border in the Real Estate in which it does not exist, Administration. • Establishment of the cadastre of pipelines in municipalities Total planned funds for survey and forming of the new in which it is partially established in the prvious period. records on state border amount 1.412.000 EUR. 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 Regtister of House Numbers, Streets and Squares and Re- Republic needs to provide 1.812.400 EUR (20%) and munici- cords of Space Units palities and users and owners of the pipelines the remaining amount of 7.249.600 EUR (80%). 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 Basic State Map, Topographic and Review-Topographic and Municipal authority competent for communal works, in Maps cooperation with the competent body for statistics works. Forming of new register of house numbers, streets and By donation of the Government of the Japan in 2007 squares, and space units is planned with this Programme. making of digital topographic map of proportions 1:25000 has Planned funds amount 1.980.000 EUR 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 Geodetic – Cadastral Information System of the Republic of works is 415.000 EUR. Records of geodetic-cadastral data on real estate and Basic state map in proportion 1:5000 (918 sheets in total) property rights on it were by now kept by Real Estate will be made by the procedure for making of the new map in Administration which, starting from 1992, has developed the

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

software called TerraSoft which also supports many functions of works and services, does not have appropriate business space the information system. in the headquarters of the Administration in Podgorica, nor in centres of regional units in municipalities. As a result of the analysis of the current situation and Reorganisation of the Real Estate Administration will be new needs pursuant to the Law and requests of users, performed in accordance with the basic functions determined by the Programme fo Works provides the modernisation of the the Law and the Strategy for Administrative Reforms in Montenegro Geodetic-Cadastral Information System, i.e. improvement - 2002-2009. As for the Law, those are the mentioned functions, of the existing hardware infrastructure (hardware, communi­ while for the Strategy of the Adminsitrative Reforms, reorganisation cation infrastructure, specialised equipment), and of the of the Real Estate Administration will specialy realise: existing software infrastructure (operative system, system for • Optimisation of the number of employees, transfer of management of the data bases, system software for business authorisations, in accordance to the Law, to geodetic communication, protection and anti-virus programmes, organisations (enterprises and entrepreneurs) i.e. transfer of implementation of the production modules etc.), aiming the administrative and professional works which are not considered increase of the productivity and providing of the quality of to be works of the government bodies; service of the Real Estate Administration. Planned funds amo­ • Control of the performance of works and responsibility unt 3.912.000 EUR. of geodetic organisations and stimulation and professional training for performance of the most complex professional works or the state survey; Restructuring of the State Territory by Land Management • Adequate preparations for providing of services to citizens (consistency of the orientation towards the client and viewing In the period from 1998 to 2002 at the area of the Republic of the citizens as valuable consumers) at lower system levels of Montenegro, smaller works were done on restructuring of the (cadastres in municipalities); land territory by land management. • Modernisation of work of Real Estate Administration through: Programme of Works on restructuring of the State territory programme of regular training of employees, introducing of by land management, partially refers to the works envisaged by knowledge of foreign language and computer literacy as the Development Strategy for food production and rural areas, minimal criteria for admission of new co-workers, introduction and finishing of the works in progress. of modern techniques of management, introduction of the In Montenegrin agriculture there are numerous limitations system form monitoring of the work results etc. and one of them is very pulverous property with low level Aiming improvement of the quality of services to users of intensity. Production in aggravating conditions on very and improvement of working conditions for employees the pulverous properties does no enable stronger modernisation Programme plans the construction of the business object of agriculture. in Podgorica and modernisation and procurement of the Maximal effects of invested funds can be expected only functional business object in regional units. in case when the programmed activities of restructuring and Estimated value of the object and equipment amounts protection of agricultural land are performed in the procedure around 5.700.000 EUR. of land management and when they are managed together by Ministry of Agriculture, Forestry and Water Management and Real Estate Administration. Archive of the Documentation on State Survey and Real In this Programme, the Real Estate Administration has Estates identified only about 240ha which should be restructured by land management and for that the funds are planned to the Documentation on real estate survey was kept in the current amount of around 48.000 EUR. 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 Reorganisation of the Real Estate Administration and system is necessary, and significant improvement of providing Modernisation and Construction of the Premises of the Real services to users of geodetic and cadastral data. Modernisation Estate Administration and Regional Units for Cadastre of Real of the Archive will be realised with the procurement of the Estates adequate office equipment for filing and physical protection of archive and other documentation, procurement of the technical Recent Real Estate Administration was organised in systems for keeping and protection of digital data, by forming of accordance with the functions from the previous Law and the data catalogue on: geodetic network, Basic State Map and regulations on work of governmental bodies. In performance topographic and review-topographic maps, establishment and of activities from its competence in Real Estate Administration work of multipurpose system for data distribution and forming about 350 people have been employed, which are assigned to of the library for the Real Estate Administration. jobs in the headquarters of the Administration, and in regional For realisation of the Programe of Modernisation of the State units. Archive of the Documentation on the State Syrvey and Real Es- Real Estate Administration, for efficient performance of tates funds are planned to the amount of 270.000 EUR.

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

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)

Sources of financial assets

Revenue from com- Share of the tax on Budget of the pensations for use of Other sources Turnover of Immov- TOTAL Programme year Republic data and providing (donations, credit) able property (EUR) (EUR) services (EUR) (EUR) (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

25 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Establishment of the Real Estate Cadastre on Regions of Municipalities Podgorica, Bijelo Polje, Andrijevica and Berane Real 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.

INTRODUCTION Survey and Real Estate Cadastre (“Official gazette of the Republic of Montenegro”, No. 29/2007 – hereinafter: the Law), in the part referring Project was made in September 2007, by the Real Estate to the previous drafting of the technical documentation (main project) Administration and it was made in accordance with the priorities based on which the works will be executed, monitoring will be established based on claims stemmed from Strategy for development performed and checking of deadlines for execution of some phases of the traffic of Montenegro, in the part related to the construction of the and total execution of works. Highway Podgorica-Andrijevica, Berane-Bijelo Polje, and from requests Due to extremely short deadlines and for the fact that in for data to be provided as the base for conduction of expropriation Montenegro geodetic organisations haven’t still been qualified for for construction of the Highway and simultaneously, to make digital performance of large and complex works, as it is the establishment of cadastral plans with the altitude presentation of the terrain as a basic the real estate cadastre on large surfaces. Main project of establishment geometric ground for making of the technical documentation for of the real estate cadastre, based on previously defined project goal, construction of the Highway (of general design and main project). was drafted by the Real Estate Administration, provided its external In accordance with that a decision was made to have on the technical control, approached the execution of preparation and other planned route for the Highway, established the real estate cadastre works on with its own capacities and provided the external competent in 17 cadastral municipalities of the area of municipality Bijelo Polje professional supervision during the execution of works. on the surface of 26.397ha, 3 cadastral municipalities of the area 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 of the municipality Berane on the surface of 3.177ha, 3 cadastral camera of the Real Estate Administration (the picture below). 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

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

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).

Diagram of activities on establishment of the real estate cadastre

Preparation works Determination and marking of Cadastral plans will be made in proportion 1:2500 in digital vector cadastral territorial units shape and in adequate formats, and contours will be generated form Detection and photographing of geodetic network the digital model of the terrain with the equidistance of 2,5m. Determination of the geodetic network (orientation of poits) Data on real estates (on position and rights on them) collected in Photogrametrical filming of the terrain the procedure of the state survey and based on the available documen- Making of photogrametric products tation, will be formed in the form of elaborate for presentation and will Decoding Collecting of data on real estates be presented to the public aiming determining of the property rights Drafting of digital cadastral plans and other real rights referring to the property rights holders. Calculation of surfaces of cadastral parcels Cadastral classification Submitting of data for public consideration Real Estate Administration, based on the Article 62 of the Law on State Survey and Building and confirmation Real Estate Cadastre (“Official gazette of the RoM”, No. 29/2007), announces of data base ADD On submitting for public consideration of data on survey and cadastral classification of land and determination of real estate rights for Total number of planned field and office quota of days of experts is CM ______about 10600. Works, during 15 months, on average will be executed by 15 to 25 experts of geodetic and juridical profession. Help of workers- Holders of property rights and holders of legal interest are being informed that in the staff men from the local area will also be used at the field. 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 CONCLUSION for the CM ______. Works of submitting Works on establishment of the real estate cadastre on un-surveyed will be performed by the Commission for Submitting which will work in the premises parts of municipalities Podgorica, Bijelo Polje, Andrijevica and Berane, ______will be executed by outside the Administration on works on control of every working day in the time from ____ to ____ . 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 After the finished submitting for public consideration and deter- works in the remaining part of the Republic, in accordance with the mining of the data on survey of real estates, and of data on rights real Medium-term Programme. Their realisation in the planned time of estates, a new real estate register, and new data base of data on real completion will bring significant savings of funds planned for that estate cadastre. purpose. 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). Real Estate Administration

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

inistry of Finance and the conditions under which the credits will Housing Commission of the be granted. The new project provides the MGovernment of the Republic 250 housing credits to the amount up to of Montenegro have initiated the Project 50.000 EUR, to the repayment period of „250 housing credits“, with the intention up to 30 years, and the interest rate of 7%. to answer a great number of requests Also, it is suggested by the Project that based on unsolved, or inadequately the Government should subsidize the solved housing issue of employees in the interest rate with 3% on the yearly level, public administration. while the interest for the end user would This Project is the continuation of the amount 4%. The Government of the last-year „1000 housing credits“, which Republic of Montenegro is providing the was designed in order to help the certain funds for the subsidizing of the interests number of citizens, and to employees from the funds designed for solving of in the public administration bodies, in housing needs. solving of the housing problem, through Terms of crediting for the project are the granting of credits for buying of new determined with the following comme­ housing objects, and through credits rcial banks: Crnogorska komercijalna for enlargement and reconstruction of banka, Hypo-Alpe-Adria banka, Prva health institutions and the stated table existing housing units. banka Crne Gore, NLB Montenegrobanka, submitted to the Work group. That project envisaged: 200 credits Podgorička banka - Societe Generale After the determination of the for reconstruction to the amounts up to Group AD methodology of distribution of credits, 5.000 €; 300 credits for enlargement of On terms agreed with the banks, Work group has accepted the tables the housing space to the amount up to the Ministry of Finance has informed for distribution of 250 housing credits, 15.000; and 500 credits for solving of the the Work group “For preparation of and reported about that to the Housing housing problem to the amounts up to enforcement of the procedure of Commission of the Government of the 30.000 €. credit borrowing of employees in the Republic of Montenegro. Commission has In accordance with the positive government administration”, formed by accepted the tables and authorised the experiences during realisation of the the Housing Commission of the Republic Work group to inform each government earlier project, larger number of new of Montenegro. After the approval by the administration body on number of credits, requests for housing credits, and of Work group on the terms of crediting, assigned to them by distribution. obligation which stemmed from the agreed with banks, Contracts have been Work group has, at the end of the promise that this project will last for many signed on 05.09.2007, between the August 2007, forwarded the information years, Ministry of Finance, in cooperation Housing Commission of the Government, to bodies, with request from bodies to with the Housing Commission of Ministry of Finance and representatives of conduct the legal procedure of adverti­ the Government of the Republic of five Montenegrin commercial banks. sing and election of the candidates for Montenegro, initiated the new Project Commission has formed a Work the assignment of credits, and to submit „250 housing credits“, which will be group, whose assignment was to the lists of candidates to the Work group realised during 2007. Opposite to the last prepare the procedure for realisation of by the end of the October. year project, credits provided with the the project. Work group has determined After the submitting of lists by the new project are intended for employees the methodology and way of schedule state bodies, Work group will forward in the government administration of credits per government bodies, and the lists to the Housing Commission of bodies, and for those employed in the determined the number of credits the Government of the Republic, which health institutions. From that number, belonging to each body. Distribution was will consider and verify them. After 200 credits were designed for employees made in accordance with the number of their verification, the lists will be sent in the public administration bodies, while employees in each body, based on which to all banks, for conclusion of individual 50 credits were intended for persons governmental bodies received a certain contracts between the government working in the health institutions. percentage share in the total number servants, to which credits were approved Ministry of Finance has, as in the of 200 housing credits. Also, Health and commercial banks. previous project, in contact with the Insurance Fund of the Republic, has made Dragan Darmanović commercial banks determined the a table of the distribution of 50 credits, to Senior Advisor

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

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

1. Introduction country with the European Union, and which should be met on the way preparation of the administration for of accession to the European Union. What do these two documents new challenges, tasks and obligations Basically, NPI is the is similar to the with common name represent, which stem from contractual obli- National Programme for Adoption of and why one country initiates their gations. Documents are of perennial the Acquis - NPAA, which all the coun- ­drafting? What are the obligations and character and are updated every year. tries with the status of candidates what is the role of the Ministry of prepare. Finance in that process? 2. National Programme of Government of the Republic of Montenegro has in June this year Integration – NPI Montenegro will after the signing formed more inter-sector work groups, whose assignment will be drafting of Stabilisation and Association National Programme of Integration of certain parts of this document in Agreement start a new phase of nego- was created from the liability stipulat- accordance with the suggested struc- tiations with the European Union and ed by the Article 72 of the Stabilisation ture. promote the dialogue. Aiming facili­ and Association Agreement, which tation of the dialogue, and of obliga­ envisages that Montenegro must, Obligations of the Ministry of tions stipulated by the Stabilisation through special programme, insure Finance, specifically Department and Association Agreement, the gradual harmonisation of all exist- for Economy, Finance, International Montenegro prepares comprehensive ing laws and future legislation with Cooperation and Games of Chance documents based on which European the legal regulations of the European are related to the coordination of Commission will evaluate meeting of Union (Acquis) . criterions for acquiring of the status activities on drafting of the second part of the document - Economic cri- of the country candidate, and after This perennial document will, terions and the third part of the docu- that for entering the European Union. beside the obligations of implemen- ment (chapters from competence of Therefore, basic idea of drafting of tation of the Acquis in the domestic the Ministry of Finance) - Capability of this kind of documents is, primar- legal system, deal with the economic, taking over of the obligations caused ily, facilitation of the dialogue of one political and administrative criterions

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.

29 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 by the membership. vious year, so that the requests set by this document are completely identi- Second part of the document cal with the Pre-Accession economic regarding the Economic criterions programme, which indicates that the from the Copenhagen, implies giving European Commission intends to of explanations regarding the degree intensify the dialogue on economic that Montenegrin economy reached policies with Montenegro. the level set by the Copenhagen cri- terions, and which measures will be Ministry of Finance has formed taken in case of not meeting of one of inter-sector work group in June this criterions in order to reach the wanted year which will work on drafting of level. the EFP. Also, international experts have been engaged, which will pro- Third part of the document means vide consultant help, and currently giving the overview of the degree are underway activities on drafting of of harmonisation of the Montenegrin the parts of the document- according legislation with the Acquisom. Work to individual assignments of members on drafting of this part of the docu- of the work group. Document will be ment requires for a number of activi- sent to the European Commission in ties on identification of regulations tion of the country for drafting of the the estimated period, by 1st December of EU regarding the certain areas, by Pre-Accession Economic Programme- this year. insight in their content by competent PEP after the gaining of the status of authorities and drafting the final text the country candidate. In the long- 4. Conclusion after that. Third part will, basically, rep- term perspective Economic and Fiscal resent the picture of the current state programme presents the guidelines These types of documents are in the legislation, harmonisation level, set by the Lisbon strategy, and for the drafted aiming the improvement and short-term and long-term priorities, Convergence Programme, which is promotion of the communication of and quantification of needed funds made after the membership. one country with the European Union for finishing of the harmonisation pro- on its way to the enrolment, both cess with the European legislation. Economic and fiscal programme with the same goal. As for the ques- should show the facts which indi- tions to which the documents give Regarding the drafting of these cate the achieved progress, realised answers, we can conclude that NPI chapters, several meetings were held through the development of the insti- mostly focuses on the legal frame- in the Ministry of Finance of inter- tutionalised and analytical capacities work, while the EFP concentrates on sector work group, individual assign- in the area of public finances and eco- the questions of public finances and ments were distributed and deadlines nomic policy, and the projections and economic policies and gives more for submitting of first versions of texts planned trends in these areas for the specific and qualified assumptions for are determined. three-year period. That is necessary for the medium-term period. However, a country candidate to realise more NPI is by its structure more compre- 3. Economic and Fiscal intense dialogue on economic poli- hensive, because beside the legisla- cies with the European Commission, Programme 2007 – 2010 tion it encompasses also the econom- especially in the sense of meeting ic, legal, political and administrative (EFP) criterions for entering the European criterions which should be met in the Monetary Union. association process. Montenegro has for the first time last year participated in the drafting of European Commission has sent the Economic and Fiscal Programme, to the Ministry of Finance in the July which is created in 2006 by European 2007, the invitation for drafting of the Commission with the intention to be new EFP, because the practice is in all constituted by the countries with the countries that the Ministry of Finance status of candidates and countries coordinates the operations on that potential candidates. Basically, the document. Suggested structure was Bojana Bošković programme should be the prepara- modified when compared to the pre- Senior Advisor

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

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.

aw Amending and Supplementing realised on 15th July every year by final deci- priated property or compensation for that the Law on Restitution of Expropriated sions submitted to the Compensation Fund property, considering that the conditions, way LProperty Rights and Compensation until 31st December of the previous year, and procedure in these cases will be arranged is published in the “Official gazette of the and dynamics and way of payment is deter- by the special law. So, those records will serve Republic of Montenegro” No. 49/07 and has mined by the Government of the Republic for considering of liabilities of the state on entered into force on 18th August 2007. This of Montenegro. Determination of the Law these grounds and as a database for adoption Law continuously provides the regulation of is that the total amount of compensation of the new Law on Restitution of Expropriated conditions, way and procedure of restitution which is being paid to the former owners can- Property Rights and Compensation to church- of expropriated property rights and other not annually exceed 0,5% of Gross Domestic es and religious congregations. property rights and compensation to former Product (GDP) from previous year for which it Furthermore, the news in this Law is that holders for rights expropriated in favour of is officially known from data of the competent the object of restitution is also the confis- national wide, national, public or common institution for statistics, while the total amount cated property, if such confiscation was done property, which were applied in the recent of compensation by this law cannot exceed because of political or ideological reasons. application of the Law. 10% of GDP for period of its application. Considering the fact that the recent law By the Law will be formed, instead of Duration of all issued series of bonds is preferred restitution in kind, this determina- municipal, three regional commissions for 10 years from the entering into force of the tion remains and is increased in a way that law conduction of first instance procedure, in Law Amending and Supplementing the Law amending and supplementing envisages that Podgorica, Bar and Bijelo Polje, which will take on Restitution of Expropriated Property Rights the property expropriated by so-called revolu- over the documentation of recent munici- and Compensation. It can be traded in bonds tionary laws can be returned also in the zone pal commissions. Commission in Podgorica on the secondary equity market. Bonds can be of national parks and coastal line. Of course, will be formed for territories of municipalities used for purchase of stocks, shares and other estates in these zones and their management Podgorica, Danilovgrad, Nikšić, Šavnik, Plužine property of the Republic of Montenegro and are arranged by special laws. and Cetinje; Commission in Bijelo Polje will state funds (Development fund, Pension and One of news in the Law is that the dispose of cases for territories of municipali- Disability Insurance fund and Employment Compensation fund is now a party in the pro- ties Bijelo Polje, Berane, Kolašin, Andrijevica, agency) for which the Government of the cedure of decision-making regarding claims Plav, Rožaje, Mojkovac, Pljevlja and Žabljak; Republic of Montenegro determines that can for restitution or compensation to former own- and Commission in Bar covers the territories be bought by the bonds of the Compensation ers, with which the role of that body is deter- of municipalities Budva, Herceg Novi, Tivat, fund. Also, bonds can be used also for pay- mined at the level adequate for its importance Kotor, Bar and Ulcinj. The Law also provides ment of tax liabilities, which are the revenues and implementation of this law. forming of Commission for conformation of of the Republic, but this possibility can be used Also, Decree on evaluation of value and the procedure, which will certainly give new only by former owners and their successors, determination of compensation for expropri- quality to their work. . and not other acquirers of bonds from the ated property rights will be innovated. First instance commissions are formed at equity market. On the solution of questions which are the level of the Ministry of Finance. Because The owner of bonds has a right to, after subject of the Law on Restitution provisions of that, second instance procedure is moved the expiration of 36 months from the day of the law are also applied which stipulate from the Ministry of Finance, and and Law of acquisition of bonds, eventually unused property-legal relations, obligation relations, Amending and Supplementing the Law on amount of bonds return to the Compensation inheriting, administrative procedure, executive Restitution of Expropriated Property Rights fund and demands repeated acknowledge- procedure and other laws, if they are not in the and Compensation it is stipulated that a ment of right on compensation in money to defiance with the Law on Restitution. Commission for Complaints is to be formed, the amount of returned bonds. For harmonisation with the provision of appointed by the Government of the Republic With this Law Amending and Supple­ the Law on the Administrative Procedure, of Montenegro. menting the Law on Restitution of Expropri­ which refer to the application of the Law, News in the Law is that there is more ways ated Property Rights and Compensation, obligation of keeping of records is stipulated of payment of the compensation amount: right is determined for churches and religious for the Fund and for the regional commissions, bonds, money and debt redemption, and congregations to declare, for records, the which are obliged to submit the monthly payment of the tax based on this. Each citizen property which was expropriated from them report to the Ministry of Finance, which will who acquires the decision decides in the Fund at the territory of the Republic of Montenegro improve the quality of information on the state if he/she will use bonds or the compensation in favour of national wide, national, public of the debt of the republic on this ground. will be paid in money. or common property, without just or market Compensation in money is being paid in compensation. Submission of application does Maja Mitrović, annual instalments, whose payment is being not represent the claim for restitution of expro- Independent Advisor

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

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

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- daily. Peers have a special authority and who do the same type of work on a ed members. credibility. Unlike academics or consul- daily basis. tants who often work outside current Similar to an association, it engages professional and geographic realities, Benchmarking in two common activities: true peers are perceived as “being in the same boat.” Most professionals are more For PEMPAL purposes we will define Peer Learning open to hearing about and studying this term as the mutual comparison of their peers activities and results. We see public finance systems and practices, Professionals in any field know that these as both relevant to our work and through which participants can gauge we are particularly interested in the realistic, in comparison to ideas offered their relative public finance develop- work being done by our peers. We want by people who come from different sys- ment and progress. Benchmarking to learn from their experiences both tems and job responsibilities. A profes- serves as one of the most common activ- good and bad. We do not want to sor or an outside expert from the private ities in which peer professionals engage. repeat their mistakes; but, more impor- sector may make valuable observations It is a natural result of peer interactions. tantly, we want to learn “what works.” about what practitioners do in public To understand better exactly what we We want to know how similarly-situated finance management. However, outsid- do, we need to know how others do practitioners understand and attempt ers do not enjoy the legitimacy given the same thing. Informal benchmarking to meet the challenges that we face to the advice and comments of those starts when we are children and never

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

stops. We not only want to know how Similar to other groups, PEMPAL also the powerful nature of peer consulta- we rank in direct comparison to others, brings technology into play to carry out tion and the positive effect that it can but we also want to use accurate and its purposes. It employs videoconfer- have in advancing the practice of public fair metrics or performance indicators to ences, websites and telephonic interac- expenditure management. They believe make the measurement. In school, we tions as fundamental tools. that sustained public expenditure man- want to know exactly how the teacher agement progress requires peer sup- will grade our examinations and deter- port to succeed in both short and long Special features mine our place in the class. We expect timeframes. the marks to be legitimate and without But PEMPAL also has its unique fea- prejudice or exceptions. In business, tures. For example it has decided that While donor involvement in PEMPAL managers ask government to create a a joint Secretariat should be based in is significant, it is not the essence of “level playing field” of regulatory poli- Slovenia at the Center of Excellence in the initiative. PEMPAL’s core reality can cies so that they can compete fairly. In Finance. The Center has developed as only be supplied by the practitioners government, we want to adapt, create a mutual capacity development orga- who come together under its banner or accept formal devices that allow us to nization used by finance ministers from to learn from each other and pursue determine our place within our various many southeastern European countries. the advancement of their professional disciplines. PEMPAL enables its mem- It has expanded its influence and use- disciplines. bers to do all three. fulness into much of the ECA region, as Azeri’s, Armenians and Moldova’s came The only way that PEMPAL can suc- Another similarity to professional to its classes. With a sustaining appro- ceed is by engaging the time and atten- associations can be found in the struc- priation from the Slovene Government tion and personal efforts of the public ture of PEMPAL. While it has a uni- and an extensive network of donors, the finance professionals in the ECA Region. fied, over-arching structure and holds Center of Excellence in Finance enjoys They must decide that the forums and plenary meetings, it has divided itself the confidence and respect of public visits enabled by this Initiative make according to Communities Of Practice expenditure management practitioners. it worth their personal involvement. (COP) focused on sub specialties within Hundreds of regional practitioners have The donors are sensitive to this reality public finance: attended its classes, developed its cur- and have made special efforts to avoid riculum and met their peers at Center playing leading roles in PEMPAL activi- • Budgeting of Excellence in Finance events. Thus it ties. Each Community of Practice must • Treasury/Information Systems exists as a unique regional resource that evolve its own identity and establish its • Internal Audit has no exact duplicate in other places own leadership. • External Audit around the world. Background Division into these subgroups is use- The World Bank has decided to pro- ful for both peer interactions and bench- vide a three year grant to the Center of In the spring of 2005, the World marking, since each distinct community Excellence in Finance to serve as the Bank ECA staff decided to bring togeth- of practice offers an enriched focus on PEMPAL Secretariat and website admin- er public expenditure management technical specializations that are essen- istrator. As a result, PEMPAL will operate practitioners at a conference in Warsaw. tial to any nation’s public finance man- administratively from inside the ECA The objective was to focus on the activi- agement system. Each Community of Region, under local institutional leader- ties and observations of the managers Practice area addresses complementary ship. More information about the Center responsible for public finance tasks in yet unique roles. For example, treasury of Excellence in Finance is available at: countries throughout the Region. specialists practice techniques that exe- www.cef-see.org cute the budget as it was formulated The meeting featured presentations and documented within the budget Another distinctive feature of of country case studies and personal department; and treasury-produced PEMPAL is the support it receives accounts of reform activities. Deputy data is vital to budget analysis, report- from a broad consortium of donors, ministers, treasurers, budget chiefs and ing and auditing. led by Britain’s DFID, the World Bank, auditors from around the region offered Germany’s InWent & GTZ, the Swiss their insights. Many professional organizations State Secretariat for Economic Affairs use similar subdivisions to attract par- (SECO), the Polish Central Bank, the U.S. The gathering was considered a suc- ticipants who have both thematic and Treasury Office of Technical Assistance cess by all involved. It was followed specialized interests. Organizations of and others interested in advancing by discussions about how to organize employers, elected officials, accountants, the practice of public finance. Leaders public expenditure management peers lawyers and doctors come to mind. within these organizations understand into groupings based on the major pro-

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

fessional disciplines needed to operate took its current shape. Jump- started have an electronic information base national finance systems. It was decided by a substantial donation from the and a forum for interactions outside of to reconvene again in Warsaw in 2006 British Department For International physical meetings to further gauge practitioner interest in Development (DFID), donors formed • Events that allow joint efforts or syn- the peer learning concept. Experiencing a Steering Committee (SC) to guide ergies among Community of Practice's, similar positive interactions at that sec- the development of the PEMPAL such as the next planned PEMPAL ple- ond conference, those involved decid- Initiative. The SC decided to foster nary meeting currently scheduled for ed on a more formal and sustained multiple Community of Practice’s orga- the first week of February, 2008 approach. nized around the four public expendi- • Small, bilateral study tours focused ture management disciplines that had on well defined issues, such as capi- Country and donor leaders identi- shown the most participant interest. tal budget execution methods; project fied some of the powerful reasons for Different donors undertook sponsor- management and monitoring; or inter- creating a permanent structure: ship duties: The Bank would support nal audit techniques. Any study tour the Treasury/IT and Internal Audit com- must be preceded by preliminary inter- • Universal practice: Public munities. U. S. Treasury signed on for actions between the peer participants, Expenditure Management is a task per- the Budget Community of Practice. such as discussions at a Community formed in every nation. There has to GTZ declared its interest in External of Practice meeting, videoconferences, be a finance ministry. There must be a Audit. Official Community of Practice telephone interactions or email ‘chats’. way to make payments. There has to representatives would be added to the • Workshops on subjects identi- be some system for deciding which Steering Committee as the different fied as priorities by each Community persons and institutions will receive or public expenditure management disci- of Practice, such as the Program contribute money to the state. plines organized themselves. Budget Workshop held by the Budget • A critical subject: efficient and Community of Practice in Tbilisi, Georgia effective public finance is at the cen- Rather than hold another Warsaw in late June 2007 ter of economic development policy plenary session, each Community of • Continuation of successful activi- and national stability. It is an essential Practice was invited to develop its own ties from previous PEMPAL interactions, requirement for any country that wants meetings and peer activities in later such as a reciprocal study visit. to advance economically. There is no 2006 and 2007. An array of interac- • Involvement with established pub- choice but to use the tools of mod- tions began in various places such as lic expenditure management organiza- ern public expenditure management Chisinau, Tbilisi, Vilnius, and Ljubljana. tions, such as OECD’s Senior Budget if national leaders want to compete or More and more PEMPAL interactions are Officers, ICGFM and the Institute of even survive in the global economy. also taking place virtually on the World Internal Auditors • Effective peer learning: many pub- Wide Web. • Emulating or borrowing ideas lic expenditure management profes- for successful peer activities from out- sionals are trying different approaches Examples of PEMPAL activities side the ECA Region, such as Africa’s to their tasks as they respond to con- include: Collaborative African Budget Reform temporary pressures and developments. • Benchmarking projects, such as the Initiative (CABRI) Budgeting suffers when there is no abil- comparison of PEFA assessment ratings • Presentation of the PEMPAL ity to do multi-year estimates of spend- or special surveys of public expenditure approach, as was the case at the Miami ing needs. Information technology has a management practices among partici- ICGFM meeting which generated this fast evolving role in finance operations. pating members article Markets demand fiscal transparency as a • Research on public expenditure price for international loans and sound management issues or practices, such debt ratings. Political leaders are not as integrated financial management sys- satisfied if accurate answers cannot be tems, applying international accounting given about how money was spent and rules or capacity development meth- whether the spending had the desired ods results. Faced with these realities, public • Videoconferences and telephone expenditure management professionals conference calls, which are particularly wanted to learn a lot more from each useful for setting future Community of other. The Warsaw meetings provided Practice agendas, planning study visits good opportunities to do just that. It and conducting Steering Committee Nikola Vukućević, MA whet the appetite of those involved for business Assistant to the Minister more peer learning opportunities. • Website development, which Richard Betrolomew Out of such considerations, PEMPAL allows each Community of Practice to US Treasury Advisor

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

Ana Miljanić „Questions for Ministry of Finance by Media Representatives” Most Frequent Questions of Media and Answers for Period July-September 2007

payment of the taxes to the Budget of the what will Ministry of Finance do on that Republic of Montenegro. occasion? Ministry of Finance has redeemed by Answer: Surplus of income over expen- now 15.989 mill € by the mentioned way ditures in the Budget of the Republic in of realisation of bonds of converted foreign 2007, is the result, on one side, of the strong currency savings. development of the Montenegrin econo- - Vijesti: Data on total realised amount of bonds my which generated higher fiscal revenues - Journalist Milorad Milošević, at the capital market are in the Central than expected, while on the other side, the nd - 2 July 2007 Depository Agency. result of the policy of the Government of Question: How much of old foreign On the base of first, second and third the Republic regarding reduction of cur- currency savings was paid for the previ- instalment 5.769 mill € was not drawn. rent public spending as the share in GDP. ous two years in money, and how much Question: Has any case of donation According to the estimation of the Ministry in bonds? How many savings depositors of old foreign currency savings been of Finance in the long term is unsustainable were paid out, by now, and how many are recorded in the CDA? Are you satisfied strong growth of the tax revenues, as it hap- they to be paid out? with the recent flow of this process? pened in 2006, and first half of the 2007, so Answer: To owners of the old foreign Answer: Based on data of the Central there is a caution with suggestion for spend- currency savings, which deposited their for- Depository Agency, from the beginning of ing of the surplus in 2007. Namely, creation eign currency savings in authorised banks at payment of the foreign currency savings, of liabilities in current public spending at the the territory of the Republic of Montenegro, there were 200 deeds of donation with total level of surplus would cause in the medium- payment is being realised in accordance value of 213.193,oo €. term, when it comes to the stabilisation of with the Law on Regulation of Liabilities Recent flow of realisation of bonds of the investment activities- instead of current and Claims on the Basis of Foreign Debt and converted foreign currency savings contin- investment boom, budgetary deficit, with Foreign Currency Savings of Citizens (“Offi- ues without problem both with the own- all, already in theory and practice, known cial gazette of the Republic of Montenegro”, ers of bonds and with the business bank, negative sides. No..55/03 and 11/04). On the base of the Central bank of Montenegro (which makes For the first time in its history Montene- stated Law, payment of the first instalment the payment of bonds), and with the Central gro realises in 2006 and 2007, budgetary st started on 1 July 2004. Depository Agency and the Commission for surplus, which proves that that result was From the beginning of the payment securities. hard to reach. Achieved macroeconomic th until 30 June 2007 (first, second and third We would like to use this opportunity to stability would be questioned very soon if instalment) 17.430 mil. € of foreign cur- inform you that total liabilities of the Repub- the surplus would be included in the public rency bonds was paid in cash. The owners of lic of Montenegro based on the bonds of the spending, which would have further con- bonds decide on way of realisation of bonds converted foreign currency savings amount sequences to the economic activity and of converted foreign currency savings, pur- 137.24mill € with the repayment period until attractiveness of the country for foreign suant to legal solutions. For stated period 2017. By 30.06.2007, total liabilities were investments. around 3000 depositors were fully paid, and reduced for 33.42 mill € - payment in cash Ministry of Finance holds a view that there are about 67539 left. and redeemed bonds, so that the remaining surplus should be used for strengthening of Question: How many bonds (and liabilities now amount 103.82 mill €. reserves for period when it comes to the sta- for which amount) were realised at the bilisation or fall of the tax revenues, for debt capital market? How many depositors repayment, which does not have a nega- still have not taken first and second tive effect on macroeconomic stability, for instalment in the previous period (what creation of the state deposit which will be amount is that)? - DAN: necessary when the construction, with the Answer: Bonds of converted foreign cur- - Journalist, Lana Strugar strategic partners or independently, of capi- rency savings can be realised in the maturity - 2nd July 2007 tal infrastructural projects in Montenegro st period (every 1 July in the year of matu- Question: Could you please comment begins, and for further reduction of tax rates, rity) and prior to the maturity period: with the unexpectedly high this-year surplus which will make the country more attractive redemption of bonds from funds, acquired of revenues over expenditures in the for foreign investments. by sale of shares of the enterprise owned by treasury of Montenegro? What are the Therefore, surplus by itself is positive the state, by sale of the state property and dangers caused by the large surplus and under condition that it does not generate

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

additional current public spending, which don Club). Each delay most certainly does Beside the mentioned division of the in combination with the strong economic not benefit to any state successor, although financial assets and liabilities, Agreement on activity present now in Montenegro, could there are some open issues. On the base of Questions of Succession defines division on cause inflation wave and disturb the bal- the process division of financial assets and 6 more spheres: movable and immovable ance of macroeconomic units- supply and liabilities until now at the account of the property, archives, pension, other rights and demand of goods, services and money. Ministry of Finance in Central Bank around obligations and private property and vested 22,2 mill EUR were paid, including 38.477,69 rights. 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 - Republika: claims in Iraq, Angola and Cuba, deposits of - Journalist of Economy, Ognjen former NBY in Swiss bank USB, foreign cur- Savić rency savings, pensions, property issues of - Vijesti: - 10th July 2007 citizens and some smaller issues. Represent- - Journalist Marija Mirjačić Questions: 1. Why is it that since Feb- atives of the Ministry of Finance and Central - 18th July 2007 ruary last year no meeting was held of Bank of Montenegro in work of the Commit- Questions: the successors of the financial assets and tee participate together with the representa- 1. Why the Law on Financial Leas- liabilities of the former SFRY and when tives of the Government of the Republic of ing does not cover supervision in that the continuation of the division can be Serbia and before each meeting of the Com- sphere? expected? mittee, points of view are being coordinated 2. Does the Ministry of Finance plans 2. Has the stalling of the final division on different questions, for common stand. amendments of the Law in order to solve had negative effects for Montenegro or Interest of Montenegro, and I believe of oth- this question, since there is an increasing maybe for other states? er states, is the soonest possible solving of all number of institutions dealing with leas- 3. What will be discussed at this meet- these questions, especially of those related ing and are there requests for amend- ing, what remained for the states from ex to debts due to international credibility of ment of the Law in that part? SFRY to agree upon and on what will the country. Also, we must emphasise that 3. Does the Ministry have data on Montenegro insist? pursuant to the Provisions of the Law on what is the total share of the leasing at 4. Did Montenegro and Serbia finish Regulation of Old Foreign Currency Savings the market (according to some estima- the division of the financial assets and of Citizens Deposited in Authorised Banks tions that figure is close to the share of liabilities of the State Union and Mon- with Headquarters Outside the Republic of some banks at the market) tenegro acquired about six percent from Montenegro (entered into force on 6th Janu- Answers: the total estate? ary this year) the Republic of Montenegro Leasing market in Montenegro has been Answers: keeps the right of claims on the base of paid regulatory completed by adoption of the 1. Until the present day 16 meetings foreign currency savings, unless it is decided Law on Financial Leasing („Official gazette of were held of the Committee for division of otherwise in the process of succession and the Republic of Montenegro”, No. 81/05 from the financial assets and liabilities of former that amount will probably be, by current 29. 12. 2005.) in December 2005. Beside the SFRY and representatives of Montenegro data, near 20 mill EUR. representatives of the Ministry of Finance, participated at the last four. Meetings are 4. Agreement between the Republic representatives of the Central Bank, USAID, organised on the principle of rotation of the of Serbia and Republic of Montenegro on Bearing Point and World Bank (SEED) also state host, and the last meeting was held in Regulation of Membership in International participated in the work group for drafting Belgrade and the following is planned to be Financial Organisations and Demarcation of the stated Law. in Sarajevo. According to information from of Financial Rights and Obligations, signed Main reason for adoption of the Law on the organizers, authorised representatives of on 10th June 2006, defines principles of divi- Financial Leasing reflected in the need for the Bosnia and Herzegovina in the Commit- sion between the two new countries and by promotion of business of financial leasing tee, the delay of the meeting was caused by provisions and annexes of the Agreement in Montenegro, as the specific credit rela- the process of constitution of the new Gov- assets and liabilities are divided between tion and its regulation with rules which will ernment of Serbia and possible change of Serbia and Montenegro. All financial rights at the same time meet the requests of legal the authorised representative of the Repub- and obligations which refer to the former security and needs of the modern business lic Srpska in the process of succession. state union Serbia and Montenegro from turnover. Aiming that, the Law determines 2. Most of financial assets and liabilities, the succession process, and that is 38% the basic framework of the business of the according to provisions of the Agreement of the total amount of the former SFRY, financial leasing, allowing the contractual on Questions of Succession signed in Vienna are divided based on determined principles parties to regulate their relations with con- in 2001, were divided based on the territo- between Serbia and Montenegro. Article 2 sent of the will. Besides, the stated Law was rial principle i.e. applying principle of the of the Agreement, determines the key for evaluated as one of the most liberal and end user, while for non allocated assets and allocation of non-allocated financial rights most competitive in the Europe, in sense liabilities the key determined by the Vienna and obligations, and based on the share of freedom of contracting and framework Agreement is used. We should mention that in the GDP of former SRY, and that in the of regulation of leasing businesses. We also the largest part of the assets and liabilities proportion 94,12% Republic of Serbia and mention that some European countries do of the former SFRY was allocated before the 5,88% Montenegro, while, as provided by not have the law on financial leasing, and Agreement on Questions of Succession in the Agreement on the Questions of the their business is regulated with other set of the direct negotiations between the states Succession, large part of other property laws which regulate economic activities.. successors and international institutions was divided on the base of the territorial In accordance with the Law the leasing (IMF, World Bank, EBRD, EIB, Paris and Lon- principle. houses, or the subjects which are engaged

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

in leasing are not obliged to acquire the are distributed free of charge exempted try of Finance brings a Decision on issuance licence for practicing of works of leasing, nor from the VAT and other taxes, and from of the licence. The Article 14 of the Law on are they object of the control and supervi- which authority such a Decision can be Accounting and Auditing defines that audit- sion of any authority, which is not the case obtained? ing can be performed by the person meet- with the countries in the region. We should Answer: ing the following conditions: emphasise that leasing companies do not It is stipulated by Provisions of the Arti- - that he/she is a certified accountant; perform their activity on the principle of cle 3 of the Law on Value Added Tax (“Official - that he/she has performed the activity “somebody else’s” funds, i.e. they are not gazette of the Republic of Montenegro”, No. of audit of legal persons at least twenty-four depository institutions, nor they collect the 65/01.....21/03, 76/05) that the VAT is paid months under the supervision of the auditor premium, as it is the case with banks and on the turnover of products and services from the Article 12 paragraph 2 of the Law; insurance companies. Owners of leasing realised by the tax payer within his activity - that he/she has no criminal record companies take their own responsibilities with compensation, and on the import of which would make him/her unworthy of the and risk to clients for business of their com- products. With provisions of the Article 24a activities of accounting and auditing. panies, as any other company. paragraph 1 item 8) of the quoted law it At the same time, the Article 27 of the In that sense, there is no need for estab- is stipulated that on turnover of daily and Law on Accounting and Auditing (“Official lishment of supervision of the work of this periodical newspapers, except for the press gazette of the Republic of Montenegro”, No. market by any body and the Government which in the whole or in the main part 69/05) stipulates that the “certificate for the of Montenegro has planned to relax this includes advertisements, VAT is payable with accountant can be acquired only by the marked by the Law from that kind of control the reduced rate of 7%. person which acquired the profession “cer- and enables the actors free entry and exit It is stipulated by the provisions of the tified accountant” in the member state or from the market. The control over business Article 5 of the quoted law that if the tax associated member of the International Fed- of leasing houses is conducted by the com- payer uses products which are part of his eration of Accountants (IFAC) or the Interna- petent inspection bodies (Tax Administra- business assets and uses them for personal tional Accounting Standards Board - IASB, tion, Market Inspection, Inspection of the needs or for needs of his employees, abal- under the condition that the programme by Labour Market…) which control the work ienates them without compensation or with which the applicant has acquired personal and business of all economic subjects in compensation lower than the one which qualifications corresponds to the training Montenegro. At the same time, providing of would be realised at the market, or uses the programme and passing of the exam of the the leasing services is allowed to all forms of for purposes which are not in the function competent authority“. legal persons and to natural persons. of his activities, such usage, or abalienation Pursuant to the Law on Accounting and Almost all companies which dominantly is considered the turnover of the products Auditing („Official gazette of the Republic of are in leasing business in Montenegro, and realised with compensation. Montenegro“ No. 69/05) there are no limita- which are the most significant market actors, According to that, there is an obligation tions for non resident to have the licence of have started their business before the new of payment of the VAT for turnover of the the auditor in Montenegro. In accordance Law, or immediately after the adoption of daily and periodical newspapers and those with the previous, the Commission for Issu- the Law. It can be concluded that the Law distributed free of charge. ance of Licences for Auditors has valued the has promoted the legal safety and contrib- fulfilment of the conditions both of resi- uted to the more attractive environment for dents and non residents and has adopted leading the leasing business in Montene- solutions on their issuance under the same gro. Although the youngest segment of conditions and criteria. the financial market in Montenegro, leasing Also, in the letter of Mr Kastratović there businesses have, in a short time, gained the are a numerous other causes because of significant market position and recogniz- - Vijesti: which he demanded abolishment of issued ability. - Journalist, Milorad Milošević licences from persons which are not citizens Ministry of Finance periodically col- - 21st August 2007 of the Republic of Montenegro. Ministry lects data from leasing houses, according Regarding the text published in the of Finance will in cooperation with other to which placements amounted 4.2% of daily “Vijesti” on 20th August 2007, with institutionns in Montenegro, and after the the projected GDP for 2007. At the mar- the headline “Lukšić is being asked to receiving the information from the Union of ket there are four dominant leasing houses take the working licences from nine audi- Accountants and Auditors of Serbia, Cham- which record significant growth of the scope tors” ber of Authorised Auditors and other inter- of their business. At the same time, more Answer: Regarding the letter of the nationally recognised specialised institutions and more banks in Montenegro within their director of the Institute of Accountants and for certification of auditors, will seriously activity offers also the leasing services and Auditors of Montenegro, Mr Milan Kastratović consider the request of the Director of the this makes this sector more competitive. This from 16.08.2007, and which refers to the Institute of Accountants and Auditors of should lead to the further improvement of abolishment of licences to persons which Montenegro and every of stated reasons for services and conditions towards the users. are not citizens of the Republic of Montene- abolishment of the licence. gro, I inform you that the Ministry of Finance I will use this opportunity to inform pursuant to the Law on Accounting and you that in accordance with the Law on Auditing (“Official gazette of the Republic Accounting and Auditing (“Official gazette of Montenegro”, No.69/05) has formed on of the Republic of Montenegro” No. 69/05) 17.11.2004 the Commission for Issuance of Ministry of Finance has started the control - Republika: Licences for Auditors, which is checking if of the submitted financial accounts business - Journalist Ognjen Savić, the person which submitted request for issu- organisations for 2006, which they were - 31st July 2007 ance of licence has met all the conditions obliged to send to the Central Register of Question: Are the journals which stipulated by the Law, after which the Minis- the Commercial court by 30th June 2007. In

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

the control, a special attention was given to - Journalist Gorica Mikić, favour of users of pensions pays the con- the question of submitted reports of audit - August 2007 tributions usable for health protection of and singers of those reports. After the com- Regarding demands of the Union of pensioners. Basis for calculation of the con- prehensive analysis and comparison of data Associations of Pensioners for re-exami- tributions for health insurance of pensioners Ministry of Finance will take measures stipu- nation of certain provisions of the Draft represents the net pension. Since the Pen- lated by the Law. Law on Contributions for Obligatory sion and Disability Insurance Fund is obliged Social Insurance to pay the contributions, the reduction of Answer: Inter-sector Work group estab- contributions for health insurance of pen- lished the Draft Law on Contributions for sioners would not affect the height of pen- Obligatory Social Insurance, and reasons sions, since according to the Law on Pension - Balkan Insight: for the adoption of the new law are based and Disability Insurance (Article 58) pensions - Journalist Bojana Stanisic, on determination shown in the Agenda are harmonised with the trend of costs of life - 22nd August 2007 of Economic reforms of the Government and the average salary in the Republic Question: The Government has of the Republic of Montenegro, to reduce It is important to emphasise that pen- expected budgetary deficit of 24,5 mill the contributions for obligatory social insur- sioners, as population, the largest users of EUR for first seven months, and instead ance of employees in order to create more the health protection in Montenegro, or that of the deficit it has three times higher favourable conditions for economic devel- 33% of total costs of the Health Fund refer to surplus than in the same period last year, opment and impetus to the entrepreneur- the covering of expenses of the health pro- What caused this growth of income? ship. Ministry of Finance was introduced to tection of persons which are insured on the Answer: Significantly higher collection the suggestion i.e. opinion of the Union of base of pensions (pensioners and members of funds based on almost all types of rev- associations of pensioners on the Draft Law of their households). enues of the budget is the result of several on Contributions for Obligatory Insurance Association of pensioners has also noted factors: and the point of their attitude refers to the the concern that the repeated reduction of • Plan for 2007, was made based on rate of contributions for health insurance the rate of contributions for pension and the realisation from previous years and the of pensioners of 19%, which remained in disability insurance with 21,6 to 20% will planned growth of the economic activity the Draft, or their suggestion of reduction endanger the solvency of the Pension and which turned out to be underestimated of that rate to 12%, stated that a higher per- Disability Insurance Fund of the Republic when compared to the realisation, which centage would negatively affect the amount and by that also their material situation. Rate caused the low base for comparison with of pensions. Also, in the opinion a concern of contributions for Pension and Disability the realisation for this year. was stated that the repeated reduction of Insurance from 20% would be applied from st • Increased economic activities in the the rate of contributions for the pension 1 January 2010, while the reduction of the sphere of civil engineering, trade, tourism and disability insurance from 21,6 to 20 % rate would continue gradually, so that for and transport caused the significantly higher would endanger the solvency of the Pension 2008, growth rate would amount 21%, for turnover of goods and consequently to this and Disability Insurance Fund of the Repub- 2009 20.5%. Taking into account that the a significantly higher collection of revenues lic and with also that their material situa- reduction of percents of the rate for pension based on VAT (increase of 28% in the period tion. First of all, reduction of contributions and disability insurance is not high, it would January-July 2007.) for obligatory social insurance represents not endangered the solvency of the Pension • Increased economic activity in the concretisation of the Tripartite Agreement and Disability Insurance Fund. mentioned areas caused the increase of the signed by the Government, Independent Finally, we should bear in mind the fact profit of the companies which reflected to syndicate and the Montenegrin Employers that the reduction of the rate of contribu- the significantly higher collection of the cor- Federation, and with which the Government tions will create more favourable business porate tax (3 times). We should emphasise of the Republic of Montenegro has commit- environment, what will reflect positively that this kind of tax is the result of the eco- ted itself to suggest the gradual reduction at the employment of new workers and nomic activity in the previous year. of contributions for health insurance, so that increase of the gross salaries of employ- • Increased economic activity in the the rate of 13,5% is gradually reduced to 9%, ees, positively affect the higher collection mentioned areas also caused higher collec- and that the burden rate of ‘’net’’ wages by of revenues of the Pension and Disability tion of the personal income tax (15.5 %) taxes and contributions in the medium-term Insurance Fund and reduction of possible • A bit lower increase is noticeable with period should go at the level of about 50%. deficits. taxes on international trade and transactions Therefore, a following rates of contributions (customs 4,3%) and with revenues from were suggested: for pension and disability excises (3,6%) insurance 20% (payable by the employer • Collection of the property tax is also 8% and payable by the employee 12%) and increased due to the increased market price for health insurance 9% (payable by the employer 5% and payable by the employee of real estates (2,79 times) - VIJESTI: 4%), while the rate for the insurance of - Journalist Marija Mirjačić, unemployment 1% (payable by the employ- - 12th September 2007 er 0,5% and payable by the employee 0,5%). Question: In which part will the new Association of Pensioners therefore suggests Law on Salaries of Civil Servants and the reduction of the rate for health insurance State Employees be different from the of pensioners from 19% to 12%. Pension and previous one? Disability Insurance Fund is the obliged for Answer: Considering the need for addi- calculations and payment of contributions tional motivation of employees with special - TVCG-DNEVNIK (national television for health insurance of pensioners, which references, and increase of the living standard of Montenegro-news): means that the Fund on its burden, and in

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

of employees in the public administration, Question: How many persons from over by new regional commissions we will and a good collection of public revenues your Ministry has left job because of be able to give approximate evaluation. We and growth of nominal GDP, Government of salary? hope it will be possible in few months. the Republic of Montenegro has obliged the Answers: Six employees left Ministry of Question: What are the highest indi- Ministry of Finance to prepare the Draft Law Finance for various reasons. vidual claims based on restitution? Amending and Supplementing Law on Sala- Answer: The highest individual decision ries of Civil Servants and State Employees, is for the amount of 2.838.000,00 EUR. There whose drafting is in progress. are 26 decisions over a million. 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? - Pobjeda, Answer : Increase of the salaries of - Journalist Mira Milović, - DAN, th employees will be different for certain pro- - 12 September 2007 - Journalist Dragana Bećirović, th fessions and cannot be significantly higher Question: In which way will the budg- - 17 September 2007 than the nominal growth of the GDP in etary surplus be used for servicing of lia- Questions: the medium term, and precise data will be bilities based on restitution? Do you have 1. How much army property at the known after the simulation on influence of at this moment framework programme territory of the Republic of Montene- the suggested solutions on the total macr- for way it will be done? gro has been sold after the regaining of oeconomic trends. Answer: The new Law envisages the independence, for how much money and Question: What is now the average possibility of debt redemption. If does not where is the money invested? salary of the civil servant? influence the calculation of the budgetary 2. How much army property at the Answer: Average net salary of the civ- surplus by itself. Adoption of all necessary territory of Montenegro was sold prior il servants a for month August amounts decisions aiming implementation of new to regaining of independence, for how 317,24 €. legal solution is underway. Also, it implies much money and what happened with Question: Since in the Law stands a forming of commissions, new issue of these funds? that data on salaries are open for public bonds, preparation of the redemption mod- 3. Does the privatisation of army eye, what is the salary of the secretary in el etc…. complexes like Valdanos, also means the the Ministry, advisor to the Minister, dep- Question: Is it possible to talk in this sale of the beach, or will they remain the uty Minister, Minister, spokesperson… phase about the surplus amount which property of the state? for comparison with the salaries on the will be used for these purposes? If yes, Answers: Of about 270 former “military” local level. what is the amount of debt which will be locations in Montenegro, not counting loca- Answer: We submit you the data on serviced with this money? tions at the border which were ceded to employees in the Ministry of Finance: salary Answer: It is necessary first to create a the Ministry of Interior, only 16 were sold. of the secretary amounts 183,86 €, Advisor model, and activities on this plan are already Two real-estates, according to the decision to the Minister from 347,32 € to 395,68 €, in progress. of the Government were taken in the share Deputy Minister from 453,64 € to 536,86 €, Question: What is the amount on the capital of the AD ‘’Plantaže’’ – Podgorica, Minister 714,78 €, Spokesperson 330,49 €. base of restitution now and how much which increased the share of the state capi- We must mention that the difference in sala- will it be increased? tal in this enterprise. When we use the term ries of certain professions is shown depend- Answer: Until now, 845 decisions “army” property, we should have in mind ing on the passed years of service. arrived in the Fund, whose total val- that it refers to the property which became Question: Beside the salaries, what ue is 155.797.000,00 EUR, out of which the property of the Republic of Montenegro are other reimbursements and other 8.112.000,00 EUR was paid in money and and with which, in accordance with the Law income in the public administration, will in bonds 26.330.000,00, so that the current on Property of the Republic of Montenegro it be increased and how high are these liability of the Fund amounts 121.355.000,00 manages the Government, which decides reimbursements when compared to EUR . on the way and procedure of privatisation. those in the local administration? Question: How many are there citi- Of these 16 locations, 12 was sold to the Answer: As for reimbursements and zens at the moment which have gained organisation of the former Fund for Reform other personal income in the public admin- right for payment and what are the maxi- of the Defence System of the State Union, istration which refer to meals during the mum amounts? therefore prior to gaining of independence, work, holiday cash grant, compensation for Answer: Total number of former holders while 4 locations were privatised after the separate life and residence… the tendency which gained right for compensation based gaining of independence of the Republic of is that they will remain at the same nominal on decisions of the municipal commissions Montenegro. level. for restitution and compensation is 3.813. From 12 locations which were sold prior Question: What is the amount of From the total number of decisions 845, 226 the gaining of independence 17,3 mill. EUR the earmarked Budged for salaries of decisions refer to amounts up to 25.000,00 were earned. Earned funds were, according employees in some Ministry, for compari- EUR, and the largest number of decisions to the conclusions of the Government of son with the local level? are these. Total value of these decisions is the Republic of Montenegro, solely used for Answer: Funds for the gross salaries and 2.726.000,00. financing of priority needs of the Army of contributions payable by employer planned Question: Is it possible to determine Montenegro: social programme for redun- by the Law on Budget of the Republic which will the final amount be of the dancies- 4,9 mill EUR, payment of funds of Montenegro for 2007, participate with debt for restitution? outstanding salaries – 5,3 mill EUR, payment 30,84% in total expenditures, and by indi- Answer: After the analysis of cases which of liabilities for material costs and compen- vidual users this participation is different. are unprocessed yet and which will be taken sations – 4 mill EUR, social protection of

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

army insured persons – 0,5 mill EUR, con- 1. By drafting of the legislations, on often warnings from IMF that the money tinuation of construction of apartments in whose preparation works the work group should not be used for public sector but Tivat for needs of the Army– 0,4 mill EUR, formed by the Minister of Finance, possi- for repayment of the foreign debt)? payment of military pensions - 0,7 mill EUR, bilities will be created for payment of foreign Answers: One of priorities of the Min- while 1,4 mill EUR, according to the Law on currency funds of citizens which depos- istry of Finance and the Government of the Restitution of Expropriated Property Rights, ited their funds in private banks «Dafiment» Republic is the maintenance of reached was paid to Compensation Fund. Remaining and «Jugoskandik». However, «Inos – AD macroeconomic stability and growth of unspent funds were paid to the Budget of – Paraćin and «Crnogorka» were not regis- the living standard. We do not expect the the Republic. tered as banks, and therefore the current and increase of salaries, realised or planned, to Since the gaining of independence 4 suggested regulations cannot be applied to the amount of 30% will affect the growth of former “military” locations were privatised, the payment to the depositors of the savings the inflation rate. and on that occasion there was an income banks «Inos – AD – Paraćin and «Crnogorka» • When we talk about the influence of of about 24,8 mill EUR, from which 23,3 mill so these kinds of claims will be paid out from the increase of salaries to the public debt EUR refers to the privatisation of the MTRZ acquired mass of these savings banks. and recommendations of the IMF that the ‘’Sava Kovačević’’. Tenders for sale of these 2. Foreign currency funds of citizens funds should be spent to the debt repay- 4 locations were initiated in the former deposited for saving in private banks could ment, it is important to indicate first that the Fund for Reform of the Defence System of not been included in the previous pay- Government is currently leading the policy the State Union, and these tenders were ment, because this question was not solved aiming increased reduction of the foreign ceded for realisation to the Government of between Serbia and Montenegro. However, and domestic debt of the state. Ministry the Republic of Montenegro. From earned the Government of the Republic of Mon- of Finance holds a view that, first of all, the funds, 18,3 mill EUR went to employees, for tenegro the recommendation to the Minis- surplus should be used for strengthening of social programme, outstanding salaries and try of Finance to prepare the legal grounds, reserves, or state deposits and second, that compensation instead of stocks, to Munici- in order to meet requests of these citizens, funds of the surplus should be used for debt pality Tivat 5 mill EUR from the privatisation or to enable in the following period the pay- repayment which will increase the share of of the MTRZ ‘’Sava Kovačević’’, while the rest ment of the funds to citizens with the resi- public debt in GDP. Collection of fiscal duties of the earned funds was paid to the Budget dence in Montenegro, whose foreign cur- above planned was one of the reasons of the Republic. rency funds are deposited in private banks for adoption of the Draft Law Amending Question of privatisation of former “mil- for which it takes some time to provide the and Supplementing Budget Law for 2007, itary” complexes, like “Valdanos” is under valid documentations. because the conditions were created for the jurisdiction of the Privatisation Council. 3. Ministry of Finance has already started increased realisation of certain goals from We emphasise that the Government pre- activities on determination of the total debt the economic policy of the Government for fers long-term lease, which means that the of mentioned banks to citizens of Montene- 2007, first of all the growth of the standard of beaches will not be privatised. gro – by public invitation to depositors for employees in the public administration and application of claims (considering the fact further reduction of the public debt of the that database is only in the Republic of Ser- Republic in order to reach the level of 30% bia) and after the application period data on of GDP by 2010. Realised surplus of revenues total debt of these banks to citizens of Mon- over expenditures enabled the continuation tenegro will be acquired. of increase of the salaries for employees in - MINA: 4. Current regulations which regulate health department, education and culture - Journalist Angelina Filipović, payment of the foreign currency savings cumulatively 30%, while for other employees - 20th September 2007 of citizens deposited in authorised banks financed from the state budget the increase Questions: will not be changed for payment of foreign will be realised starting with the 1st January 1. When does the Government plan currency funds deposited in private banks, 2008. Funds for gross salaries of employees to realise the payment of savings to citi- considering that this issue will be regulated are increased for 20,2 mill EUR by the Draft zens of Montenegro which invested in with special directive, on whose drafting, as Law, while the funds for debt repayment Dafiment and Jugoskandik bank? Will we already mentioned, work group will work are significantly increased and amount 68,9 that payment encompass the depositors to determine the dynamics of payment of mil.€. of Inos and Crnogorka? these funds. 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 - ANTENA M, savings depositors, be changed for the - Journalist Predrag Tomović payment of these liabilities? - 26th September 2007 5. Will the payment to depositors in the “pyramidal banks” imply the same Questions: Shall the increase of sala- dynamics as of the repayment of debt to ries of 30% for part of employed persons depositors which have already realised in the oublic sector (police, courts) lead their rights? to the growth of the inflation rate? How will the increase of salaries Ana Miljanić Answers: affect the foreign debt (since there are SPOKESPERSON

40 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Review of the Most Important Activities of the Minister of Finance Period July – September 2007

September 20th 2007: Statement then the Federal Republic of Yugoslavia, of the Government for the following of the Minister of Finance Igor Lukšić, on the occasion of regulating the mem- period, especially in the area of infra- after the Session of the Govern- bership in World Bank, signed six con- structure and energy. Minister pointed ment of the Republic of Montenegro solidation loans, out of which three refer out the results that the Government regarding adoption of Information to Montenegro. Tranches for the credits had achieved in development of Mon- on tranche redemption of consoli- amount to 19,1 million EUR, 46,5 million tenegrin economic system in total and dation loan of the International Bank EUR and 21,6 million EUR. With this pre- he emphasized the improvement that for Reconstruction and Development mature repayment, the amount saved in has been evident in the last 4 years, con- (IBRD) budget would be from 24,3 to 28,1 mil- secutively. The Ambassador expressed lion EUR, until 2031. The premature debt interest for the process of joining Euro- repayment to Japan that amount to pean Union and indicated the impor- 300 thousands EUR, conditions would tance of adequate preparation of pro- be created for complete harmonization cedures and administration. Taking into of the relations with that country and consideration that Montenegro and eventually, favourable credit arrange- Malta are small countries with very simi- ments could be possible in the fol- lar developmental priorities, the Ambas- lowing period of time. The Ministry of sador has expressed readiness to coop- Finance is obliged to review, through erate and exchange information in the bilateral contacts, the option of prema- areas that are highly developed in Malta, ture repayment and debt restructuring such as tourism, education system, IT that Montenegro has toward Great Brit- sector, banking operation …’ ain, Denmark, Norway and Sweden and that amounts to 1,1 million EUR...». September 13th 2007: Statement of Minister of Finance, Mr. Igor Lukšić September 17th 2007: Minister of PhD, after the Session of the Govern- the Finance, Mr. Igor Lukšić held talks ment of the Republic of Montenegro the newly appointed Ambassador of regarding the ascertainment of the ...«The Government of the Republic the Republic Malta, Mr. Frank Gale... Draft Law Amending and Supple- of Montenegro will in the following two menting Budget Law of the Republic weeks come to an agreement with World of Montenegro for 2007 and Draft Bank on all issues regarding the tech- Law Amending and Supplement- nique of premature redemption of one ing the Law on Non-Governmental or two instalments of credit tranche and Organisations in the following period, of debt repay- ...„Law Amending and Supple- ment to Japan, Great Britain, Sweden, menting the Budget Law envisages Denmark and Norway. The Government the increase of the current budget, so has adopted Information on tranche instead of 617 million EUR, it will amount redemption of consolidation loan of ...‘During the discussion, the opin- 749 million EUR. According to estima- the International Bank for Reconstruc- ions on current economic and politi- tions, this year revenues will amount tion and Development (IBRD), which cal situation were exchanged, with the to 750 million EUR, out of which 740 approximately amounts to 19 million emphasis on major macroeconomic million EUR are direct revenues and the EUR. That consolidation loan was paid trends in the past years. Minister Lukšić rest of it are project loans and credits. on Monday. The Government, after ana- has informed the Ambassador on gen- It is estimated that current expenses lyzing the structure of external debt and eral economic indexes – inflation level, will increase for 30 million EUR, 20 mil- parallel budgetary savings, has decided growth of gross domestic product, level lion EUR are provided for gross earn- to prematurely repay one tranche of of foreign investments, as well as the ings and material and services expenses consolidation loan to the IBRD. In 2001, process of privatisation and priorities are increased for approximately 7 mil-

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

lion EUR. One of planned significant FIS (Finance Intelligence Service), Mr. employees in public administration increases is the increase of the transfer Viktor Zubkov and the director of the and Health sector. This project pro- for social protection because it is neces- Administration for the prevention of vides for offering 200 housing credits sary to start the implementation of the money laundering, Predrag Mitrović to persons employed in public admin- Programme of partial subsidy support ...„Interlocutors have expressed their istration and 50 to those employed in for electricity bills to the most vulner- satisfaction regarding the signing of Health sector. able households. Increase of subsidies the Memorandum of Understanding The Contract has been signed by is planned for settling the obligations between the Montenegrin Administra- Minister of the Finance, Mr Igor Lukšić, assumed after the privatization of the tion for the prevention of money laun- chairman of the Housing Commis- Steel plant, transfers for funds and the dering and Russian FIS, that will precisely sion of the Governmental, Mr Suad biggest part of these transfers refers to govern the issues concerning with entire Numanović and managing direc- the Health Insurance Fund, due to the cooperation between two financial intel- tors of the following banks: Crnogor- increase of earnings in that sector. Due ligence services and establish efficient ska komercijalna, Societe Generale to the revision, for the dispute will be information exchange. During the (Podgorička), Hypo Alpe Adria and appropriated around 1,5 million EUR discussion, opinions on implemented Prva banka, Mrs Milka Ljumović, Mr more, while the surplus of the profit economic reforms in Montenegro were Mladen Rabrenović, Mr Christian Toeltl, realized by Agency for telecommunica- exchanged as well as on overall trends in Mr Velimir Bogdanović, as well as by tions will be directed to the Broadcast- Montenegrin economy. The director of the representative of NLB Montene- ing Centre. Part of the money will be the Russian FIS, Mr. Zubkov, said the he grobanka, Mr Dino Redžepagić. The also spent on beginning of the work of had been informed in detail on the activ- Government officials have explicated E-Government. Repayment of two debt ities of the Montenegrin Administration that this is the continuation of the last instalments to the World Bank (each for prevention of money laundering and year project during which, one thou- instalment amounts to 20 million EUR) support that has been given by the sand housing credits was assigned. is planned by the end of the year. We are Ministry of Finance to the Administra- Maximum amount of the credit has considering the option to increase the tion in question. He also stated that the been increased from last year amount tranche that we intend to pay out of this cooperation and communication with of 30 thousands EUR to 50 thousands amount, which would further reduce the the Republic of Montenegro has been EUR and the repayment period has public debt. Public spending will be 47% very successful, so far. The experience been extended from 20 to 30 years. of the gross domestic product and the exchange between two Governments Interest rate will be seven percent, public revenues would be 52%. That’s contributes to the goal that is governed and the Republic will pay three per- rather high, but so is the percentage of by this Memorandum of Understanding cent. Minister Lukšić: “…In my estima- public revenues, that tells us more about – improved and more efficient meth- tion, the Government’s subvention will unrealistically law report on GDP. In my odology of processing complex cases, reach the amount of 360 thousands opinion, GDP is significantly higher than emphasized Mr. Zubkov. In addition, the EUR in total, if the credits are realized its estimation … « agreement between Administration for to the full extent. It is very important to « …At the session, the Government Prevention of Money Laundering and us to continue implementation of this has adopted the Law Amending and Russian FIS on organizing the official visit project in cooperation with commer- Supplementing the Law on Non-gov- of Montenegrin analysts to Moscow and cial banks, in order to extend the pos- ernmental Organizations, due to the Russian FIS analysts to Montenegro, for sibilities of solving the housing issue, general notion that some of them are achievement of mutual improvement which we at the Government regard as avoiding tax payment by practising eco- of those specialized services, has been one of the crucial objectives aiming at nomic activities that they’re not sup- favourably judged...’ living standard improvement...”. Manag- posed to practise. In cooperation with ing director of Hypo Alpe Adria bank, non-governmental organization it was September 5th 2007: Signing of the Mr Christian Toeltl, made a statement agreed that they can continue with Contract with Commercial Banks, aim- on behalf of all commercial banks, in practising economic activities, but if ing at realization of the Project «250 which he said that they are honoured their annual income is more than four housing credits» and it is their pleasure to participate in thousands EUR or 20% of the realized such project, which, in his opinion «has income of the previous year, they have a social aspect, beside the business to register the enterprise. The aim is to one». «We are certain that this project have NGOs that truly fulfil the mission has a future», said Mr Toeltl. Conditions they assigned for instead of registering a for applying in this year project are: NGO as coverage for tax evasion …«. the length of service, lack of housing ‘Representatives of the Govern- space and number of household mem- ment of Montenegro and five Mon- September 7th 2007: Minister of bers. The Ministries and administrative tenegrin banks signed the Contract the Finance, Igor Lukšić PhD, held authorities are supposed to sign a Con- on realization of the project called talks with the director of the Russian tract with the credit beneficiary that “250 housing credits” that refers to

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

will oblige the beneficiary to stay for Programme should be finalized in 2010. Law on Contributions for Mandatory the certain period of time in that insti- The European Investment Bank will Social Insurance, Draft Law Amend- tution in order to keep beneficiaries approve the credit for the construction ing and Supplementing the Law from quitting their job after the solving of the northern extension. Arrangement on Capital Transfer Tax, Draft Law of housing issue …’ regarding the energy area provides for Amending and Supplementing Law the extremely important investments on Value Added Tax and Report on August 28th 2007: Signing of the into the transfer system and improve- the work of Operative team for pre- Contract on Financing Montenegrin ment of the power-supply quality in vention of illegal trade in cigarettes Sustainable Tourism Development some areas, as well as the fulfilling the Project (MSTDP) and the Contract needed conditions for the implementa- on Financing the Project» Energy tion of the Agreement on energy indus- Community of South-East Europe try and acquisition of the equipment for APL 3 – Project for Montenegro 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. „...Montenegrin Government has Mr Olters said that these projects adopted today the Law Amending and Supplementing the Law on Capital ’ were the result of a close and constant Transfer Tax, according to which the rate The Contracts were signed by Min- cooperation between World Bank and of that tax will be increased from two to ister of Finance, Mr Igor Lukšić and Montenegro. “The main challenge in three percent, from next year. Minister permanent representative of World creating economic policy is to provide Lukšić stated that Law Amending and Bank (WB) for Montenegro, Mr Jan-Peter such surrounding that will stimulate Supplementing the Law on Financing Olters, As well as the Mayor of Ulcinj, Mr and enable productivity increase as well of Local Self-Governments will be pre- Gzim Hajdinaga and executive director as the sustainable rate of the economic pared soon and the structure of division of the Regional water supply company- growth in a medium and long term. of the revenues from capital transfer tax Montenegrin coast, Mr Zoran Bošnjak. Montenegro has a significant potential will be changed..»From the part that The credit assigned for the support to and all necessary factors needed for was designated for the budget, the 20% the tourism sustainable development the upkeep of the dynamic growth rate will be directed to the Equalisation fund. is worth ten million USD, and it will and insured the improvement of living Therefore, the proportion will be 30 to be used for financing the project of standard. There’s a huge potential in 70% from now on, i.e. the larger part of improvement in the spatial usage plan- Montenegrin tourism that can be uti- revenues will be directed to Municipali- ning and protection of delta of the river lized well only if the existing infrastruc- ties. According to the estimations, the Bojana-Buna. This contract also provides ture improves and if characteristics of budget incomes will be increased for for the investments into water transfer Montenegro, that make it attractive to five million euros, after the beginning of from Skadar Lake to water supply sys- the tourists, are preserved. World Bank the implementation of the higher rate tem for municipalities Bar and Ulcinj intends to support the Government of the capital transfer tax.“... and touristic zones Velika plaža and in successful making and implementa- The Government also adopted Law Valdanos. Energy transfer system, imple- tion of the joint approach to the man- Amending and Supplementing the Law mentation of the power energy market agement of coastal areas in order to on Value Added Tax (VAT), and from liberalization programme and joining decrease degradation of the area and to now on, the lower rate (7%) will be the regional market in accordance with support the development of the highly also implemented in the area of serv- the Agreement on forming the energy sustainable tourism in accordance with ices in marinas and for the computer community of South-East Europe will be environment protection principles at equipment, in order to stimulate the financed with nine million USD, which the same time. Adequate amount of development of nautical tourism and WB approved to Montenegro at the electricity power is the second factor information society. »The lower rate of beginning of July. Montenegro has the needed for the insurance of dynamic VAT has been implemented in the area opportunity to start with repayment of and sustainable growth rate …” of marina services due to the estima- these credits in 10 years and the repay- tion that Montenegro could be one of ment period is twenty years. Minister July 26th 2007: The statement of the most competitive destination for Lukšić: “…World Bank will finance the the Minister Igor Lukšić after the ses- the development of nautical tourism. construction of the southern extension sion of the Government on ascertain- Together with Law on Yachts, this is a of the regional water supply system ment of Draft Law Amending and good way for Montenegro to attract that in accordance with Government’s Supplementing Budget Law, Draft people interested in the development

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

of nautical tourism. Lower VAT rate will one place...“. At the session, the Govern- tax revenues are being collected much be in effect until the joining of Montene- ment also adopted Report on the work better than it was planned, which con- gro to Europe Union, unless it is agreed of operative team for the prevention firms that there are dynamic economic differently with European Commission. of illegal cigarettes trade for the first activities in Montenegro. It was also Other significant amendment of the six months. The Report shows great pointed to the importance of the adop- Law on Value Added Tax (VAT) is crea- effects that are above the expectation, tion of the Law on Contributions for tion of the legal ground for implemen- according to the implementation of the Mandatory Social Insurance, that will tation of so called fiscal terminals, i.e. Action plan for the prevention of illegal govern the gradual decrease of the tax GPS connection between the catering cigarettes trade. »...Financial effect, com- and contribution on earnings in total. In and retail establishments with tax cash pared to the last year, is enlarged four Mrs Kalancopulos’s opinion, the overall register and Tax Administration, start- times; revenues from the excises were economic results and indicators in Mon- ing from next year...“. „...In accordance less than one million EUR last year and tenegro are very positive; therefore, she with the adopted Draft Law on Contri- during the first six months of this year, expressed the readiness of World Bank, butions for Mandatory Social Insurance, they have been around four million EUR. within the Strategy of cooperation from the conditions are created from next Revenues from the excises, together 2007 until 2010, to assist Montenegro in year, to gradually decrease the contribu- with VAT and customs duties amount to efficient realization of the capital project tions rate, until 2010. Therefore, in 2010, 5,7 million EUR. Registered legal turno- and aims. The mutual satisfaction was one EUR of earnings will be charged ver is 524,5 tons, and it was 274,5 last expressed regarding the forthcom- with 51,52 cents of taxes and contribu- year. The registered legal turnover of ing joint activities on improvement of tions. This will rank Montenegro among the export cigarettes is tripled this year, economic growth. This will be accom- the most competitive countries in the compared to the last one. We are very plished through strengthening of the region and wider, when it comes to this satisfied with these effects, since they private sector role and further develop- issue. Combined rate of contributions indicate that total revenues until the ment of institutions and legislation, that payable by the employer and employee end of year could exceed the 15 million will be in accordance with international will be, as he further explained, 30%; out euros budgetary, and when we com- standards. of which 20% will be pension and disa- pare this with the spending estimation, bility insurance, 9% will be health insur- it turns out that grey economy could be July 19th 2007: The statement of ance and 1% will go to the Employment under 15 percent...’ Minister of Finance Igor Lukšić, after Agency. For taxi drivers, green market the session of the Government of the sellers, whose annual turnover is less July 23th 2007: Minister of Finance Republic of Montenegro regarding than 18 thousand EUR, the contribution Igor Lukšić had a meeting with the the adoption of the Law on Games rate will be calculated by taking 60% of Director and Regional Coordina- of Chance - the average income for the calculation tor of the World Bank for countries „... The Draft Law Amending and base. Thus, their tax obligations will be in South-East Europe, Mrs Orsalija Supplementing Games of Chance Law around 70 EUR a month, which is much Kalancopulos - limitates the number of casinos in Mon- more favourable than it is now. “In addi- ...The mutual satisfaction regarding tenegro to 14 casinos. There are 3 casi- tion, the Government adopted Draft the opening of the office of the World nos in Montenegro at the moment, Law Amending and Supplementing the Bank in Podgorica was expressed during so there is a possibility for opening 11 Budget Law that creates condition for the discussion. It was noted that this will more. Each Municipality in the coastal merging two Laws, which have existed contribute to improved realization of area will have one casino and taking simultaneously so far. »...The Law on future projects in the field of road infra- into consideration the existing situa- public sector debt accumulation, in its structure, energy sources, and tourism tion, the Municipality of Budva will get most important provisions will become and environment protection. The inter- three concessions at the most. One a part of the Budget Law, from now on. locutors stated that investments are concession for opening a casino will be The significant change is that conditions needed into local infrastructure, with appointed to Bijelo Polje, Nikšić, Kolašin, for the consolidation of the budget necessary production of space plans in Rožaje and Žabljak, each. The begin- next year are being created; therefore, order to valorize potentials of certain ning price for a concession for run- the Parliament will verify the entire areas. Minister Lukšić emphasized that ning casinos will be one million EUR, public spending, except the munici- policy of rational budgetary spending, which means that in the adequate ten- pal one. In the following phase, they together with economic development, der procedure a larger amount may be all be connected to the consolidated followed by strong investment boom, obtained. In communication with NGO account, when the needed conditions results in surplus that is being used for sector, it was agreed that amendments are met, all five Republic funds will be additional reduction of taxes, with the and supplements should define division connected to consolidated account, so aim of achieving long-term competi- of the revenues from games of chance instead of placing orders to the banks, tiveness of economic system. He also in a more precise manner. According to they’ll be placing order to the Treasury stated that the latest tax reform has the existing Law, 60% of the revenues and all payments will be done from been successfully realized and that the obtained from the games of chance is

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

used for realization of certain projects debt are liabilities resulting from the during the fiscal year, after the special old savings and restitution, that have INTERVIEWS OF open competition and 40% is used for grown, compared to the data at the the current Government activities. Now, end of the last year. Liabilities for restitu- MINISTER OF we have defined that 75% out of these tion amounted 99,5 million EUR, in the 60% will be assigned to NGO projects. middle of the last year. We should take FINANCE, Statutory regulation, that will be draft- into consideration that the total of the IGOR LUKŠIĆ PhD ed, will govern the division of those issued bonds is much higher, around 75% more precisely. This result was also 130 million EUR, but the part of it was achieved, among others, at the Counsel closed through privatisation, because for disabled persons and we consider they were used at the market; therefore, In the period from this revenue as a tool for improvement net level of the obligations is around July to September of functioning of those NGOs. Past rev- 96 million EUR. The debt of local self- enues from games of chance, on a governments has significantly grown, 2007. monthly level, were around 400 thou- although some of the municipalities sand euros and this amount exceeds with high debt amount used the better the planned one, therefore, the total of realisation of the budget for repayment these revenues are expected to reach of the liabilities. Debt servicing at the the amount of five million euros until end of the year will indicate the reduc- the end of this year. The amendments tion of the liabilities on this ground … ». and supplements of the Law also gov- « … The outstanding budgetary liabili- published in August 27 th 2007 ern the establishment of the Adminis- ties that in 2003 exceeded 100 million Journalist, Dragana Crvenica tration for games of chance that will be EUR, decreased at the end of the June www.vijesti.cg.yu obliged to implement this Regulation. to 3,2 million EUR. We expect the addi- www.ministarstvo-finansija.vlada.cg.yu The Ministry of Finance will intensify tional reduction of the public debt, due activities on on-line monitoring of the to the current new tranche of the repay- organizers of games of chance...“. ment of old savings, premature repay- ment of the debt to the World Bank July 12th 2007: Statement of Min- and further decrease of the other debit ister of Finance Igor Lukšić after the entries. Debt servicing for old savings published in September 17 th Session of the Government of Mon- does not include around 20 million EUR, Journalist Mili Prelević tenegro, regarding the adoption of deposited in banks, with head offices www.cgekonomist.com the Report on Account of Public Debt outside Montenegro, out of which, 700 www.ministarstvo-finansija.vlada.cg.yu of the Republic of Montenegro, on thousand EUR was paid off until now. June 30th 2007. 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 published in September 2007 for two tranches to coincide; the one Journalist, Vladimir Mihailović that is going on the last couple of days www.ministarstvo-finansija.vlada.cg.yu - At the end of June, the public and the repayment of old savings under debt of Montenegro amounted 768 mil- these liabilities … ». 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, published in September 2007 the public debt amounted 870,7 mil- www.bbc.co.uk 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 WWW.MINISTARSTVO-FINANSIJA.CG.YU or 23,7 percent of GDP, and the internal PR SERVICE is 257,9 million EUR or 12 percent. The Ana Miljanić, 85 percents of the external debt are Spokesperson soon... inherited ones, from the past period Biljana Bataković, www.ministarstvo-finansija.vlada.cg.yu and the biggest part of the internal Assistant Spokesperson

45 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Info/Review of Other News for Period July - September 2007 • Press statement of Ana Miljanić, tenegro has become 185th member of the Republic for August 2007, were realised Spokesperson of the Ministry of Finance IMF and member of the World Bank Group, to the amount of 92,395,331.68€, which is on the occasion of the premature repay- which created space for continuation of 46,54% higher than planned and 63,02 % ment of the tranche of the consolidating cooperation with these financial institutions. higher when compared to the August 2006. loan of the International Bank for Recon- In accordance with that, the Government Structure of realised direct revenues for struction and Development (IBRD) has accepted the document of Strategy on August 2007 is the following: Cooperation of Montenegro with the World - tax revenues amount 72,959,994.29 € Bank Group, which was conceived for reach- and are 30,01% higher than planned. Higher ing strategic goals and above all: realisation is evident in all taxes and: in Per- - increase of the sustainable econom- sonal income tax (6,95 %), property tax (2 ic growth, through increase of economic times), Other taxes of the Republic (49,16%), freedoms and strengthening of the role of Corporate tax (1,95 times) Excises (46,84%), the private sector; Value added tax (29,17%) and tax on interna- - establishment of institutions and legal tional trade and transactions (14 %), rules which will be in accordance with the - Revenues from duties amount international rules; -promotion of the liv- 1,796,098.87 € which makes 99,84% when ing standard of citizens through adequate compared to the plan, whereas the collec- educational, health and social protection tion of revenues from stamp duties is lover systems. for 10,95%, revenues based on court fees are The Strategy defined the basic financial 26.63 % higher than planned amount and programme of 69 million USD, out of which revenues based on residence tax are 8,25% - Ministry of Finance has on Monday 19 million USD, through the International lower than planned amount, 17th September, as we planned, made the Development Association (IDA), and 50 mil- - Revenues from compensations amount premature repayment of one tranche of lion USD through the International Bank for 2,556,634.93€, which makes 82,43 % of the the consolidating loan of the International Reconstruction and Development (IBRD), in planned amount. The highest realisation Bank for Reconstruction and Development the period from 2007 until 2010. According when compared to the plan on the base of (IBRD) in the total amount of 18,999,771 (19 to the Strategy, Montenegro, in cooperation compensations is realised in compensations million) EUR including also the costs of the with the World Bank, will realise projects from for usage of goods of common interest (5,34 premature repayment. After the performed spheres: sustainable development of tour- times). Higher realisation of revenues when analysis of the structure of the foreign debt ism, electric power industry, reform of the compared to plan based on compensa- of Montenegro and comparable budget- cadastre, promotion of the social services tions is evident in ecological compensations ary savings, in accordance with the basic and help to Montenegro on its way to acces- (31,61%), compensations for organizing of goal debt management, reduction of servic- sion to European Union. games on chance (15,47%) and in compen- ing costs, the Government of Montenegro, www.ministarstvo-finansija.vlada.cg.yu sations for roads (7,15%). Realisation is lower upon suggestion of the Ministry of Finance, in compensations for usage of natural goods, decided to make the premature repayment • Realised receipts of the Budget of and it amounts 73,53% of planned amount. of one tranche of the consolidating loan of the Republic for period January-August - Other revenues of the Republic amount the IBRD. Tranche of the loan D of IBRD which 2007 14,849,687.49 €, which is 9,44 times higher was repaid was serviced with the interest than planned amount Increase of other rev- rate of 5.44%, and from 2009 with vari- enues of the Republic is the result of col- able interest rate EUR Libor + 0.55% and on lected yields on capital to the amount of grounds of premature repayment the budg- 12,591,256.05 €, which were not planned in the etary savings will be realised until end of the budget for 2007. Receipts of the Budget of the repayment period 2031, to the amount of Republic for period January-August amount around 10,6 mill. EUR. Final goal is the reduc- 510,076,710.47€. tion of public debt from 35 to 30 percent of Receipts of the Budget of the Republic Direct revenues of the Budget of the GDP, which would provide to the Govern- for August 2007, were realised to the amount Republic for period January-August 2007 ment a higher credit for realisation of some of 92,456,641.74 €. amount 504,413,453.67€ and are 30,0 % of more important infrastructural projects. Direct revenues (including receipts from higher than planned and 43,71% higher than Let us remind you that in January 2007, Mon- the credit repayment) of the Budget of the realisation in the same period last year.

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

Structure of direct revenues of the Budg- 2,006,539.98 €, which is 97.98 % of the • Information on the progress of pay- et of the Republic in this period is following: planned amount. Higher realisation of rev- ment of foreign currency savings - Revenues based on taxes amount enues when compared to the plan on the - Payment of old foreign currency sav- 446,047,985.36€ and are 28,1 % higher than base of compensations is evident in almost ings of citizens, deposited in foreign currency planned. Higher realisation when compared all types of compensations and the largest accounts and foreign savings deposit books to the plan is evident in all types of taxes. is in collection of compensation for usage with authorised banks with headquarters at In property tax the realisation is 2,6 times of goods of common interest (5.49 times). the territory of the Republic, and of foreign higher than planned amount, and in profit Realisation is only lower in compensations currency savings of citizens with residence in tax 2,9 times higher than planned. for roads 86.70% of the planned amount- the Republic, which deposited their foreign - Revenues from duties amount Other revenues of the Republic amount currency savings in authorised banks with 12,290,968.48 €, which is 5,9% lower than 1,722,142.49 €, which is 20.75 % higher than headquarters outside the Republic of Mon- planned amount (lower collection of stamp planned amount. tenegro. For holders of foreign currency sav- duties when compared to the planned amount Receipts of the Budget of the Repub- ings bonds, which were acquired in accord- - Revenues from compensations amount lic for period January-July 2007, amount ance with the Law on Regulation of Liabilities 14,518,149.02 €, which is 8,7 % higher than 415,545,620.76€. Direct revenues of the and Claims on the Basis of Foreign Debt and planned amount. Higher realisation when Budget of the Republic for period January- Foreign Currency Savings of Citizens (“Offi- compared to the plan is evident in all com- July 2007, amount 410,124,101.63 € and are cial gazette of the Republic of Montenegro”, pensations except in compensations for 26.0 % higher than planned and 39,24 % No.55/03 and 11/04), payment of fourth usage of natural goods where realisation is higher than realisation in the same period instalment started on 2nd July 2007. Pay- 50% of the plan and compensation for roads last year. Structure of the direct revenues of ment of foreign currency bonds is performed where the realisation is 92,9 % when com- the Budget of the Republic in this period is through business banks, and regional centres pared to the plan. the following: - revenues from taxes amount of the Central Bank of Montenegro. - Other revenues of the Republic amount 373.087.991,07€ and are 27.7 % higher than Foreign currency savings depositors, i.e. 28,038,784.07 €, which is 2,74 times the planned. Higher realisation when compared citizens which registered themselves in the planned amount. This increase is caused by to the plan is evident in all types of taxes. In Central Depositary Agency as holders of for- the collected yields on capital to the amount property tax the realisation is 3.01 times the eign currency savings bonds, can draw the of 13,960,256.05 €, which were not planned planned amount; fourth instalment in regional centres of the by the budget for 2007, and by higher col- - revenues from duties amount Central Bank of Montenegro and Atlasmont- lection of other revenues when compared to 10,494,869.61 €, which is 7.8 % lower than banka AD Podgorica branch office Pljevlja, planned (74,9%). Revenues made by authori- the planned amount (lower collection of depending on their place of residence, based ties and their activities amount 95,9% of the stamp duties when compared to the planned on their identification document (identity planned amount. amount); - revenues from compensations card, passport). www.ministarstvo-finansija.vlada.cg.yu amount 11,961,514.09 €, which is 16,6 % high- Holders of foreign currency savings, er than planned amount. Higher realisation which haven’t drawn the first instalment, • Realised receipts of the Budget of when compared to the plan is evident in all should go to the window of the bank where the Republic for period January – July types of compensations except in compensa- they deposited their savings. Former sav- 2007 tions for usage of natural goods where reali- ings depositors of Montenegrobanka AD – Receipts of the Budget of the Republic sation is 90,3 % when compared to the plan; Podgorica and Jugobanka AD Podgorica in for July 2007, were realised to the amount of - other revenues of the Republic amount bankruptcy, should report to the appropriate 70,232,348.95 €. Direct revenues (including 12,428,643.44 €, which is 43,8 % higher window of the Central Bank of Montenegro. receipts from the credit repayment) of the than the planned amount, and is caused by Legal persons, which acquired bonds Budget of the Republic for July 2007, were the larger level of realised other revenues on the basis of foreign currency savings by realised to the amount of 70,212,634.42€, when compared to planned. Revenues from purchase of the bonds at the stock exchange, which is 25.40 % higher than planned and authorities and their activities amount 99.4% can draw instalment OBO7 at the window of 38.44 % higher than in July 2006. Structure of the planned amount. PRVA BANKA CRNE GORE. of realised direct revenues for July 2007 is www.ministarstvo-finansija.vlada.cg.yu From the beginning of the payment of the following: - revenues from taxes amount the fourth instalment, through windows of 64,367,729.33 € and are 27.71% higher than • Bulletin of the Ministry of Finance banks and regional centres of the Central planned. Higher realisation than planned is No 8 was Published Bank of Montenegro, 3.559.776,98 €, i.e. 2635 evident in almost all taxes and in: Personal of holders of foreign currency savings bonds Income Tax (11.90 %), Property tax (2.83 were paid off, out of which the first time 60 times), and in other revenues of the Republic holders of foreign currency savings came (47.38%), in corporate tax (2.54 times) Excis- for the first time and to them 62.195,00 € es (15.55%), Value added tax (30.03%) and was paid. tax on international trade and transactions Obligation of the Republic of Montene- (13.60 %), - revenues from duties amount gro on the grounds of payment of foreign 1,876,954.83 € which is 13.37% higher than currency savings of citizens, which acquired planned, whereas the collection of revenues their right in accordance with the Law on from stamp duties is 10.97% higher, rev- Regulation of Liabilities and Claims on the enues based on court fees 14.36 % higher Basis of Foreign Debt and Foreign Currency than planned amount and revenues from Savings of Citizens amounts 137,2 mil.€, by residence tax 30.46% higher than planned now 37,0 mil € was paid ( in cash 21,0 mil- amount, lion and redeemed 16,0 mil.€ of bonds), so - Revenues from compensations amount that now foreign debt on the base of foreign

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

currency savings of citizens amounts 100,2 outside the Republic of Montenegro will be imported cigarettes are significantly mil.€ realised by following rate: increased, in the first half of 2006 amounted Debt on the basis of foreign currency - First instalment, to the amount of 965.268,89 EUR, and in the same period savings becomes mature: 380,00 € per savings deposit will be paid 90 2007, 3.988.039,73 EUR. Also, according to - 01.07.2004, - 388,00 € per savings days from the entering into force of the Law the records of the Agency for Tobacco, the deposit; (payment started on 10. 04.2007), number of registered merchants which are - 01.07.2005, - 530,00 € per savings - Second instalment, to the amount of in retail sale of cigarettes is continuously deposit. 530,00 € per savings deposit, will be paid growing. Payment of remaining amount of the from 1st July 2008. Legalisation of the cigarettes market foreign currency savings is divided into 12 Payment of the remaining amount of the is becoming specially attractive for world annual instalments, which become mature foreign currency savings will be realised in known companies in the production of ciga- each 1st July until 2017, but the annual nine annual instalments which become due rettes, like Philippe Morris, which recently instalment for payment cannot be less than every 1st July in the period from 2009 until acquired the licence of the wholesaler in 500,00 €. 2017, but the annual instalment cannot be cigarettes, and the arrival of several other Foreign currency savings bonds can be less than 500,00 €. leading producers and tobacco brands is realised before the mature period for: Foreign currency savings bonds can be expected. With the development of the ciga- - Purchase of shares of public enterprises realised prior to maturity period for: rettes market and strengthening of the com- and enterprises owned by funds in the priva- - Purchase of shares of public enterprises petition among the participants, European tisation process; and enterprises owned by funds in the priva- standards are gradually being established in - Purchase of apartments, residential tisation process; this activity. Operative team has continued in rooms, business areas, land or other property - Purchase of apartments, residential the previous period with activities on the plan owned by the state, for which the Republic rooms, business areas, land or other property of control and achieved results indicate the decides that can be bought with bonds owned by the state, for which the Republic significant reduction of the illegal trade both which are not due for payment; decides that can be bought with bonds on public surfaces and in legal retail objects. - Payment of tax liabilities with bonds which are not due for payment; Operative team has noted that at the begin- which are due in the year to which tax liabil- - Payment of tax liabilities with bonds ning of the main tourisms season the risk of ity refers. which are due in the year to which tax liabil- illegal trade in cigarettes is being increased ity refers. in the coastal municipalities and has indi- Since 10th April 2007, through business Based on the Public invitation for apply- cated the necessity for emphasising of the units of Crnogorska komercijalna banka AD ing for filing of holders of foreign currency higher controls in cooperation with the local Podgorica, payment is being realised of for- savings of citizens with residence in the self-governments in municipalities which are eign currency savings of citizens with resi- Republic, which deposited their foreign cur- recognised by illegal turnover which can dence in the Republic of Montenegro, which rency savings with authorised banks outside endanger current results in prevention of this do not realise that right by laws of the coun- the Republic, around 7000 holders of foreign phenomenon. try in which the headquarter of the author- currency savings have reported to the Minis- www.ministarstvo-finansija.vlada.cg.yu ised bank is. Way, deadline and procedure try of Finance with total value of foreign cur- of payment of foreign currency savings of rency savings of around 19,8 mil.€. citizens with residence in the Republic, is By now, the first instalment was drawn stipulated by the Law on Payment of Foreign by 2522 holders of foreign currency savings, Currency Savings of Citizens Deposited with and to them was paid 889.907,93 €. Authorised Banks with Headquarters Outside the Republic of Montenegro (“Official gazette On the grounds of recent applying and of the Republic of Montenegro”, No. 81/06) payments, citizens with residence in the and Guidelines on Way of Realisation of Pay- Republic of Montenegro have deposited for- ment of Foreign Currency Savings of Citizens eign currency savings with authorised banks With Authorised Banks with Headquarters whose headquarters are in Slovenia, Croatia, Outside the Republic of Montenegro(“Official Bosnia and Herzegovina and Serbia. gazette of the Republic of Montenegro”, No. www.ministarstvo-finansija.vlada.cg.yu 20/07). In order to realise the payment of for- • Press statement of the Operative eign currency savings with claims for pay- team for fight against the illegal trade in ment of foreign currency savings, a foreign cigarettes savings deposit book should be submitted, Thanks to the synchronised activities of foreign currency account with proof of bal- the competent bodies from the Operative ance of parent bank and proof of residence. team, in the previous period very impres- Submitting of claims for payment of foreign sive results were achieved on prevention of currency savings is done until 6th January the illegal trade in cigarettes. Legal turno- 2008, through business units of Crnogorska ver of cigarettes at the domestic market is komercijalna banka AD Podgorica. being significantly increased, so that the . Payment of foreign currency savings in sale of imported cigarettes in the period accordance with the Law on Payment of For- January- June this year is three times higher, eign Currency Savings of Citizens Deposited from 118,5 in 2006 to 368,5 tons in 2007. with Authorised Banks with Headquarters Budgetary revenues from excises on the PR Service

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

Public Debt of the Republic of Montenegro - 30th September, 2007 Account and Changes in Public Debt of the Republic of Montenegro in the Third Quarter of 2007 ublic Debt of the Republic of three months, while the first drawing Also, a one-off repayment of the ­Montenegro, without public enter- of funds from the credit of the Societe liabilities to creditors from Paris donors Pprises, at the end of the third quar- Generale Bank was performed for the club is planned, whose claims are less ter of 2007 amounts 773 mill EUR or 35,9% procurement of the IT equipment for than 1 mill SDR, and in accordance with of the Gross domestic product (GDP). schools. provisions of the Adjusted Minutes on Internal debt amounts 272,4 mill EUR or Draft Law Amending and Consolidation of Debt of the Federal 12,7% of GDP, while foreign debt amounts Supplementing the Budget Law for 2007, Republic of Yugoslavia, signed on 28th 506,6 mill EUR or 23,2% of the GDP. stipulates the repayment of one more December 2001. Furthermore, in the fol- In the foreign debt in the previous tranche of the consolidation loan to IBRD, lowing period one-off repayment will quarter there has been a reduction of total and depending on the income trend be realised to the Ministry of Economy liability for 9,5 mill EUR, due to the repay- the account of debt on this ground will and Trade of Japan within the Paris Club ment of one tranche of the consolidation be reduced for additional 1 to 2% of the and signing of the bilateral agreement loan of the International Bank for Relief GDP. Budgetary savings based on already with Germany. Agreement with Germany and Development (IBRD) to the amount redeemed tranche amount around provides the possibility of debt writeoff to of 18,999,771 EUR including costs for 800,000 EUR per year, or around 10,6 mill. KfW, or debt swap for certain project, to ­premature repayments. Account of debt EUR in total until the end of the amortisa- the amount of 13 mill. EUR, which would in International Development Association, tion period, and in the case of additional additionally reduce foreign liabilities. Kreditanstalt für Wiederaufbau - Germany redemption savings would be from 1,3 During 2007, agreements were signed - KfW, Hungarian and Polish credits is mill. EUR to 3,1 mill. EUR per year or in and first drawings of the credit funds are higher for the drawings in the previous total amount from 11 mill. EUR to 28 mill. 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

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

arrangements signed during Serbia and ounces of gold. national income. Government sector, Montenegro, which referred to the EIB In the internal debt in the last quarter according to ESA-95 encompasses four projects in Montenegro. Namely, 13 mill. call in arrears of the budget from were sub sectors: central Government, govern- EUR remained undrawn, for projects from paid in total while T-bills were redeemed ment of countries or regions (if they exist), the sphere of roads 4 mill. EUR, recon- in total. In the old foreign currency sav- local governments and social funds, and struction of airports 1 mill. EUR, waste ings payment of the fourth instalment their debt is according to definition con- waters 5 mill. EUR and energetics 3 mill. has started and the debt was reduced sidered to be the Government debt. The EUR, and these funds will most likely be for 6 mill. EUR, while the payment of sav- Protocol from the Maastricht Contract on e employed with special contracts or ings of citizens deposited in authorised European Union, 1992, defines total debt amendments to the existing ones. banks with headquarters outside the of the government as gross debt account As for the outstanding debt issues, fol- Republic of Montenegro is being realised on nominal value at the end of the fiscal lowing should be regulated in the forth- in Montenegro and by now around 1,1 year, consolidated between sectors of the coming period: debt to Governments of mill. EUR has been paid. Government. Libya, opened negotiations, and Kuwait, Liabilities on ground of restitution In the existing regulatory rules, the clearing debt of SFRY to Czech Republic is increased for 25,5 mill. EUR in the last Law on Borrowing and Debt Management and Slovakia, first round of negotiations three months, until now absolute decrees of the Public Sector, includes in the debt was made, and debt based on API bonds were enacted to the amount of 155,8 mill. of public sector besides the three men- (Alternative Participation Instruments) EUR out of which 8,1 mill EUR was paid in tioned sub-sectors also the debt of public within the London Club of Creditors. Debt cash and 26,33 mill. EUR of bonds were enterprises, while the Provision of the new to governments of these four countries redeemed. Draft Law on Budget defines the term become Montenegrin on the base of Public debt of the Republic of national in accordance with the terminol- allocation of non-allocated debt (5,88% Montenegro, with public enterprises ogy of ESA-95. The new general law on of 38% for Serbia and Montenegro), amounts 865,9 mill. EUR or around 40,2% budget will in a simpler way regulate the and exact amount of debt and way of GDP on 30th September 2007. Public borrowing procedure of the Republic of rescheduling will be determined during enterprises which are beneficiaries of Montenegro, issuance of guarantees and negotiations. As for the API bonds it is foreign credits, for which Montenegro public debt management. Also, drafting aimed at finding of possibility for bilateral has given guarantee or counter-guaran- of the Strategy for public debt manage- solution of this issue, because the credi- tee, Monteput, Airports of Montenegro, ment for the following three-year period tor, the UBS bank, until recently insisted Electric Power Industry of Montenegro is in progress, which will define basic on multilateral framework for solution. and Agency for Flight Control are enter- guidelines for borrowing, i.e. the borrow- Data stated in the table 1 indicate prises with autonomous income, and ing programme, projection of public debt gross public debt of the Republic of there is reasonable assumption that the trend and sustainability. The Strategy for Montenegro without public enterprises, stated enterprises will service their liabili- period 2007-2009 will also introduce the while in claims the most significant is ties regularly, so according the ESA 95 basic guidelines for cash management the debt of the Russian Federation to the accounting method these liabilities were of the Ministry of Finance and neces- Republic of Montenegro to the amount not included in the public debt, but are sary infrastructure for anticipation of cash of 18 mill USD, agreement was signed treated as the debt of the public sec- inflows and outflows. . on 27th of April, and inflow of unblocked tor. Namely, according to the terminol- Evaluation and sustainability of the funds from the succession process to the ogy ESA-95, only the general government public debt amount of around 2,5 mill USD. Also, in sector debt is observed, while the gen- Table 2. Height and structure of the the net indebtedness should be con- eral government sector includes all units public debt of Montenegro in period sidered also state of the deposit of the which produce for individual and collec- 2002 - September 2007 Ministry of Finance which together with tive spending and are mostly financed As it can be seen in the Table 2., funds amount on 31st August 2007, about from paying of other units, basically of level of public debt was reduced 88,3% 203 mill. EUR, including also 38.477,689 of those that participate in the division of 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

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

1,5% of GDP. services significantly reduces ratio of ser- until the beginning of the World War II, Largest share of the foreign debt, vice of liabilities. Other liquidity ratio, rela- when in average to ten countries per year around 84%, is the debt from the period tion of interest and total export of goods announced defaults, and for example of SFRY, and was assumed by the Law and services in 2006 is 2,2%. in ‘30-ies and ‘40-ies of the last Centu­ on Regulation of Liabilities and Claims From other relevant indicators, rela- ry during the great depression even over Based on Foreign Debt and Old Foreign tion between serviced liabilities (interests 15 countries per year. From that period Currency Savings, while even 80% of the and capital amounts) and GDP was 5% in follows great fall of debt crises, only few domestic debt, primarily liabilities based 2006, while relation between debt ser- countries per year and only at the begin- on old foreign currency savings and res- vice and budgetary revenues was 16%, ning of ‘90-ies defaults on bank credits are titution, «inherited» on the grounds of and these indicators have recorded fall in somewhat more often. liabilities from the period of SFRY. last couple of years. For first indicator the Regarding relation between foreign Internal debt, after the tendency of amount of about 2% is expected, and for and internal debt developed countries fall especially during 2005 and 2006, has second under 10% until 2009. Indicators have almost the same share in the total a trend of growth during 2007, primarily of liquidity, although very static, as more- debt, while in developing countries that because of growth of debt on the basis over other indebtedness indicators, serve ratio is 3:1 in favour of foreign debt, of enforceable decisions of commissions as good instruments for indicators of reg- and the main reason for that is the level of municipalities on the grounds of res- ular service of liabilities of the country. of development of the domestic capital titution and updating of data on debt of Due to the growth of budgetary rev- market. Anyway, term internal debt is municipalities. enues and export of goods and services related mostly to the liabilities of servic- In evaluation of public debt sustain- during 2007, and even to the smaller obli- ing in domestic currency, and in that case ability, according to the methodology gations of debt service in 2007, ratios of the country has more possibilities on the used by the World Bank, but only for sus- liquidity will be more favourable. occasion of servicing of these liabilities, tainability of foreign debt, Montenegro For comparison of the share of the mostly by issuance of money or increase can be classified as low indebted country. debt in GDP, we should mention that of tax rates. In Montenegro, share of inter- Namely, with both criteria, relation of NPV for example in 27 countries of European nal debt in the total debt is 35,4 %, and (although the amount is not explicitly Union in 2006, that percentage amount- has tendency of growth due to liabilities determined, does not change significant- ed 61,7%, while for 13 countries of Euro based on restitution, but due to relatively ly percents shown here) and GDP (over Zone it amounted even 69%. It is inter- long maturity period and low interest, 80% of countries is highly indebted, 48%- esting that new member countries (10 even though it is serviced in EURO, it is 80% moderately indebted and less than countries which become EU members considered to be sustainable. 48% is low indebted) relation of NPV pub- in 2004, and Bulgaria and Romania) have lic debt and export of goods and services average, non - pondered, of about 35% of (over 220% - highly indebted, 132%-220% the share in GDP. Baltic countries have the moderately indebted and under 132% of lowest percentage participation (Estonia low indebted), Montenegro is in catego- even 4,4%), while on the other hand Italy ry of low indebted economies. Data for and Greece have over 100% participation Montenegro for the first criterion is 35,9%, of the public debt in GDP. It is also spe- and for the second 83% (according to cific that, except for Malta and Cyprus all data of the Central Bank of Montenegro small countries have participation to 30%, export of goods and services in 2006, was and that is in the lights of sustainability of 948 mill EUR without remittances, which debt very important, because smaller sys- also enter the account by methodology tems, especially without possibility to for of World Bank). Also in the third, widely issuance of own currency, are less flexible used criterion, relation of public debt and regarding servicing of liabilities based on budgetary revenues, for Montenegro that foreign debt. ratio amounts about 130%, which indi- Determining of the level of public cates that Montenegro has sustainable debt as non-sustainable is problematic debt position. and it depends from the country (level of With liquidity, or possibility of regular industrialisation, diversification of econ- service of liabilities on the base of pub- omy, fiscal flexibility etc.). According to lic debt, relation between total service researches, in 55% of cases, public debt in of debt and export of goods and ser- the year before ceasing of dept servicing vices in 2006, was under 10%, which is was at the level lover than 60% of GDP, significantly under critical value of 30%. while in 35% of cases share of the debt in During 2006, liabilities based on service GDP was lower than 40%. Nemanja Pavličić, were around 90 mill EUR while in 2005 Average public debt level in the devel- Coordinator of the Department they were about 125 mill EUR, including oping countries, in the year before ceas- for Public Debt Management, service of old foreign currency savings ing of debt repayment (default), amount- Indebtedness Analysis, and restitution, and that, with the same ed about 50% of GDP. Furthermore, debt Cash Management income based on export of goods and crises were often from the 19th Century and International Relations

51 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Realisation of Public Spending at the Local Level Period January - June 2007 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 € Subsidies from Assigned Equalisation Total Ordinal Municipalities Local revenues the Budget of % revenues fund (3 to 6) the Republic 1 2 3 4 5 6 7 8 1. Andrijevica 511,213 26,447 125,411 663,071 0.56 2. 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 %) .

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

In the following table an overview of realised local (direct) budgetary revenues of municipalities for period January-June 2007, by sources: in € Other local Ordinal number Municipality Fiscal revenues Total (3+4) % revenues 1 2 3 4 5 6 1 Andrijevica 95,159 416,054 511,213 0.52 2 Bar 3,755,865 2,758,046 6,513,911 6.57 3 Berane 515,204 727,563 1,242,767 1.25 4 Bijelo Polje 1,171,344 391,822 1,563,166 1.58 5 Budva 8,772,477 9,538,886 18,311,363 18.46 6 Danilovgrad 439,318 1,045,892 1,485,210 1.50 7 Žabljak 90,853 112,669 203,522 0.20 8 Kolašin 813,246 675,670 1,488,916 1.50 9 Kotor 8,325,340 6,556,891 14,882,231 15.00 10 Mojkovac 183,015 136,517 319,532 0.32 11 Nikšić 3,751,891 2,449,803 6,201,694 6.25 12 Plav 158,072 53,331 211,403 0.21 13 Plužine 274,628 62,831 337,459 0.34 14 Pljevlja 2,913,821 449,130 3,362,951 3.39 15 Podgorica 16,094,874 15,555,145 31,650,019 31.90 16 Rožaje 565,151 1,208,249 1,773,400 1.79 17 Tivat 1,148,516 970,825 2,119,341 2.14 18 Ulcinj 893,349 38,255 931,604 0.94 19 Herceg Novi 3,930,590 1,180,087 5,110,677 5.15 20 Cetinje 495,983 371,138 867,121 0.87 21 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 € Concession Annual Personal Capital compensation for compensation for Total Ordinal number Municipality Structure income tax transfer tax usage of natural registration of motor (3 to 6) goods vehicles 1 2 3 4 5 6 7 8 1 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

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

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: Expenditures of municipalities I-VI 2007 Municipality Realisation per Plan Realisation % of realisation capita Andrijevica 590.721,99 274.180,08 46,41 47,4 Bar 5.290.669,00 3.931.776,00 74,32 98,2 Berane 2.907.652,58 1.789.501,72 61,54 51,0 Bijelo Polje 3.325.000,00 2.507.185,46 75,40 49,9 Budva 21.815.000,00 16.506.696,71 75,67 1.037,6 Danilovgrad 1.865.000,00 1.551.091,87 83,17 93,9 Herceg Novi 6.852.500,00 4.897.657,00 71,47 148,3 Kolašin 2.479.615,00 1.678.107,47 67,68 168,7 Kotor 6.173.046,16 5.406.928,36 87,59 235,6 Mojkovac 995.381,65 545.932,07 54,85 54,2 Nikšić 11.894.107,00 7.994.358,97 67,21 106,2 Plav 1.020.440,00 485.536,01 47,58 35,2 Plužine 732.750,00 506.898,24 69,18 118,7 Pljevlja 6.435.000,00 3.636.415,69 56,51 101,6 Podgorica 21.683.705,00 25.041.516,74 115,49 148,1 Rožaje 1.891.500,00 1.950.005,18 103,09 85,9 Tivat 1.823.425,00 1.528.042,92 83,80 112,1 Ulcinj 1.447.000,00 1.387.342,63 95,88 68,4 Cetinje 2.495.000,00 1.562.222,00 62,61 84,5 Šavnik 469.965,54 239.502,98 50,96 81,3 Žabljak 895.000,00 350.267,00 39,14 83,3 TOTAL 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).

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

Consolidated expenditures Consolidated % of Debt Total Municipality Current Capital Other Transfers public spending GDP repayment expenditures expenses expenditures 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 0,71 1 Credits 9.220.701,61 0,43 a Short-term 3.032.861,15 0,14 Capital amount 3.002.787,27 0,14 Interest 66.526,97 0,00 b Long-term 6.308.094,15 0,29 Capital amount 4.376.435,43 0,20 Interest 481.308,63 0,02 2 Bonds 2.928.509,00 0,14 3 Guarantees 3.075.015,20 0,14 II Foreign debt 17.451.355,44 0,81

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

1 Credits 17.343.751,05 0,80 a Short-term 1.943.132,88 0,09 Capital amount 1.943.132,88 0,09 Interest 0,00 0,00 b Long-term 15.400.618,17 0,71 Capital amount 14.016.841,94 0,65 Interest 1.383.776,23 0,06 2 Bonds 0,00 0,00 3 Guarantees 0,00 0,00 I+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:

TOTAL in Ordinal Type of call in arrear % BDP-a mil € 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 Karadžić Independent Advisor, Gordana Radović Independent Advisor

56 Bulletin of the Mi­ni­s­tr­y of Fi­nance of Montenegr­o/July - September­ 2007 Consolidated Public Spending in Montenegro in Period I - IX 2007 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.

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

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

Current expenditures 347,817,674.54 348,473,367.62 100.19 Gross salaries and contributions payable by employer 193,779,606.35 187,542,355.32 96.78 Net salaries 111,528,693.13 109,452,385.69 98.14 Income tax 21,837,431.59 21,100,045.03 96.62 Contributions payable by employee 31,564,100.54 29,438,148.27 93.26 Contributions payable by employer 25,699,619.81 24,753,202.92 96.32 Municipal surtax 3,149,761.28 2,798,573.42 88.85 Other personal income 26,526,264.93 23,607,597.45 89.00 Material and service expenses 73,433,619.72 87,505,767.71 119.16 Current maintenance 19,674,849.78 18,095,517.56 91.97 Interests 15,676,647.32 18,153,479.56 115.80 Rent 4,548,250.63 4,058,311.10 89.23 Subsidies 7,627,426.46 5,661,037.71 74.22 Other expenditures 6,551,009.35 3,849,301.20 58.76 Transfers for social security 193,741,327.48 205,357,084.82 106.00 Rights from the field of social security 26,730,731.90 28,288,368.89 105.83 Funds for redundancies 10,427,079.95 8,383,604.84 80.40 Other rights from field of health security 7,077,055.69 7,605,065.00 107.46 Other rights from field of health insurance 3,510,709.94 4,708,286.00 134.11 Transfers to institutions, individuals and non-government sector 83,615,041.32 55,998,977.59 66.97 Transfers to public institutions 55,572,318.67 29,206,750.57 52.56 Transfers 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 99.89 Transfers to public enterprises 7,131,260.13 5,788,596.27 81.17 Capital expenditures 109,241,335.19 75,989,100.46 69.56 Loans and credits 7,682,099.59 5,974,844.09 77.78 Reserves 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 7,851,796.42 310.41 Debt repayment 15,963,537.27 34,490,526.67 216.06 Repayment of liabilities from previous period 9,419,374.40 26,110,963.55 277.20 Repayment 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 -567.27 Credits and securities -1,722,246.59 -9,785,413.94 568.18 Loans 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 86.52 Donations 3,289,568.93 894,487.23 27.19 Privatisation 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 €.

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

Realisation Plan January- % of DESCRIPTION January- September 2007 realisation September 2007 Current revenues 442,600,091.64 572,527,499.15 129.4 Taxes 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 49,328,612.11 103.7 Other taxes of the Republic 3,469,647.99 4,705,076.33 135.6 Duties 14,669,093.88 13,754,706.83 93.8 Administrative 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 379,758.79 458,747.55 120.8 Compensations 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 3,167,341.10 115.9 Road fees 4,665,342.87 4,769,390.36 102.2 Other compensations 2,009,013.84 2,239,555.00 111.5 Other revenues 11,847,702.55 29,933,429.63 252.7 Yields 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 91.2 EXPENDITURES 447,077,127.27 390,516,093.64 87.3 Current expenditures 253,556,297.05 228,758,445.88 90.2 Gross 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 98.7 Personal income tax 14,625,787.20 14,225,133.20 97.3 Contributions payable by employee 21,949,319.82 20,380,608.58 92.9 Contributions payable by employer 17,686,378.13 16,959,891.90 95.9 Municipal surtax 2,057,416.89 1,948,903.67 94.7 Other personal income 16,626,150.50 13,561,515.02 81.6 Material and service expenses 56,497,662.48 41,687,835.86 73.8 Current maintenance 15,243,944.82 13,515,254.14 88.7 Interests 14,758,265.26 17,393,807.46 117.9 Rent 4,114,103.55 3,740,660.81 90.9 Subsidies 7,146,249.97 5,229,662.99 73.2 Other expenses 4,298,624.24 2,610,948.72 60.7 Transfers for social security 34,187,132.50 31,993,816.64 93.6 Rights from the sphere of social protection 26,527,132.53 28,073,001.47 105.8 Funds 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 96.1 Transfers to public institutions 18,904,713.35 16,860,441.72 89.2 Transfers to non-government institutions 4,624,311.58 4,753,043.53 102.8 Transfers to individuals 5,790,291.96 5,267,966.31 91.0 Transfers to Pension and Disability Insurance Fund of the Republic 48,251,999.97 47,690,666.64 98.8 Transfers to the Health Insurance Fund of the Republic 5,159,999.97 5,159,999.97 100.0 Transfers to the Employment Agency 4,927,500.00 5,952,980.00 120.8 Transfers to municipalities 1,555,124.86 671,337.32 43.2 Transfers to public enterprises 926,250.03 294,680.33 31.8 Capital expenditures 58,574,688.96 33,588,480.72 57.3 Loans and credits 4,557,947.04 4,335,091.08 95.1 Repayment of guarantees 1,583,370.00 0.00 0.0 Reserves 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 0.00 Debt repayment to residents 6,006,262.50 20,758,829.88 345.62 Repayment of liabilities from previous period 4,062,771.78 20,294,820.13 499.53 Old foreign currency savings 7,500,000.00 7,913,252.69 105.51

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

Foreign financing 973,027.53 -7,194,258.71 -739.37 Credits 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 17.18 Debt repayment to residents 11,379,472.47 9,300,790.65 81.73 Donations 450,000.00 61,940.06 13.76 Privatisation revenues 8,548,329.38 5,078,750.00 59.41 Increase/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: Economic DESCRIPTION Plan Difference Revision classification 7 Receipts 616,86 132,23 749,09 71 Current revenues 583,49 143,39 726,87 711 Taxes 528,70 124,91 653,61 7111 Personal income tax 66,12 7,75 73,87 7112 Corporate tax 15,03 25,26 40,29 7113 Property tax 5,93 8,24 14,17 7114 Value added tax 297,14 72,57 369,71 7115 Excises 79,35 6,60 85,95 7116 Tax on international trade and transactions 60,66 3,22 63,88 7118 Other taxes of the Republic 4,48 1,27 5,75 713 Duties 20,12 -2,61 17,52 7131 Administrative duties 14,25 -4,26 9,99 7132 Court fees 5,47 1,62 7,09 7133 Residence taxes 0,41 0,03 0,43 714 Compensations 18,64 3,05 21,68 7141 Fees for usage of goods of common interest 1,35 2,98 4,33 7142 Fees for usage of natural resources 3,23 -0,48 2,75 7143 Ecological fees 2,11 0,24 2,35 7144 Games of chance fees 4,02 0,65 4,67 7148 Road fees 5,85 -0,46 5,40 7149 Other compensations 2,07 0,11 2,18 715 Other revenues 16,02 18,03 34,06 7151 Yields on capital 0,00 13,96 13,96 7152 Penalties and divested property benefits 8,03 1,95 9,98 7153 Revenues made by authorities and their activities 3,68 -0,11 3,57 7155 Other revenues 4,31 2,24 6,55 72 Receipts from the sale of property 11,40 -3,40 8,00 722 Receipts from the sale of financial property 11,40 -3,40 8,00 7221 Sale of shares 11,40 -3,40 8,00 73 Receipts from credit repayment 5,51 -0,76 4,75 731 Receipts from credit repayment 5,51 -0,76 4,75 7311 Receipts from repayment of credits given to other levels 5,51 -0,76 4,75 74 Donations and transfers 0,60 0,00 0,60 741 Donations and transfers 0,60 0,00 0,60 7411 Current donations 0,60 0,00 0,60 75 Loans and credits 15,87 -7,00 8,87 751 Loans and credits 15,87 -7,00 8,87 7512 Loans and credits from foreign sources 4,87 0,00 4,87 7512 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

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

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 €.

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

250,00 200,00 201,53 225,51 138,39 150,00 166,20 100,00

50,00 0,00

Q1 realisationostvarenje Q2 realisationostvarenje Q3-plan Q4-plan

Plan January- Realisation % of DESCRIPTION September January- eptember realisation Current revenues 102,282,000.00 112,476,715.10 109.97 Contributions 101,532,000.00 111,061,678.62 109.39 Contributions for pension and disability insurance 101,532,000.00 111,061,678.62 109.39 Other revenues 750,000.00 1,415,036.48 188.67 Yields on capital 0.00 571,709.00 0.00 Revenues made by authorities and their activities 0.00 867.46 Other revenues 750,000.00 842,460.02 112.33 Expenditures 150,533,999.97 160,641,309.41 106.71 Current 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 80.50 Net salaries 1,013,249.97 928,139.61 91.60 Income 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 73.44 Other personal income 204,750.00 239,303.99 116.88 Material and service expenses 1,500,000.03 1,928,677.09 128.58 Current maintenance 120,000.00 99,230.71 82.69 Interests 300,000.00 59,861.45 19.95 Rent 37,500.00 30,425.71 81.14 Other expenditures 58,500.00 76,459.67 130.70 Transfers for social protection 145,995,750.00 156,371,760.09 107.11 Rights 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 65.24 Loans and credits 127,500.03 75,000.00 58.82 Reserves 112,500.00 0.00 Deficit 0.00 -473,927.67 Financing 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 98.84 Increase/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.

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

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 € .

Plan January- Realisation % of DESCRIPTION September January-September realisation Current revenues 81,779,309.06 88,860,463.00 108.66 Contributions 80,722,500.00 82,198,429.00 101.83 Contributions for health insurance 80,722,500.00 82,198,429.00 101.83 Other revenues 1,056,809.06 6,631,103.00 627.46 Revenues made by authorities and their activities 1,056,809.06 6,631,103.00 627.46 Receipts 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 0.00 Expenditures 86,939,309.06 93,540,232.00 107.59 Current expenditures 43,778,358.04 71,193,765.00 162.62 Gross 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 96.65 Income tax 4,298,767.98 4,328,864.00 100.70 Contributions payable by employee 5,947,934.06 5,445,201.00 91.55 Contributions payable by employer 4,857,951.85 4,745,048.00 97.68 Municipal surtax 685,930.17 486,031.00 70.86 Other personal income 5,519,863.82 5,965,775.00 108.08 Material and service expenses 1,000,530.25 29,744,863.00 2,972.91 Current maintenance 92,371.50 655,983.00 710.16 Interests 168,264.75 344,247.00 204.59 Rent 3,425.49 5,758.00 168.09 Other expenditures 1,056,299.01 0.00 0.00 Transfers for social protection 10,587,765.63 12,313,351.00 116.30 Other rights from field of health security 7,077,055.69 7,605,065.00 107.46 Other 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 26.71 Transfers to public institutions 32,573,185.39 8,663,026.00 26.60 Transfers to individuals 0.00 37,000.00 0.00 Capital expenditures 0.00 1,333,090.00 0.00 Deficit 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 5,159,999.97 100.00 Increase/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.€.

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

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.

Realisation Plan January- % of DESCRIPTION January- September realisation September 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

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

5. LOCAL SELF-GOVERNMENT

Evaluated 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. Plan January- Realisation January- DESCRIPTION % of realisation September September Current revenues 96.004.836,21 103.697.449,89 108,01 Taxes 43.802.151,71 47.546.881,16 108,55 Personal income tax 13.532.380,98 13.750.165,80 101,61 Property tax 15.143.544,72 20.519.227,09 135,50 Local taxes 15.126.226,01 13.277.488,27 87,78 Duties 9.921.241,53 10.487.053,60 105,70 Administrative taxes 1.370.385,19 1.508.904,45 110,11 Residence taxes 843.591,24 884.770,80 104,88 Local municipal taxes 7.707.265,10 8.093.378,35 105,01 Compensations 33.941.131,64 38.438.188,23 113,25 Fees for usage of goods of common interests 2.284.853,89 2.799.096,58 122,51 Fees for usage of building land 6.311.070,35 7.226.623,87 114,51 Fees for construction and maintenance of local roads 2.606.942,72 3.337.289,86 128,02 Other compensations 22.738.264,68 25.075.177,92 110,28 Other revenues 6.121.084,16 5.395.138,37 88,14 Receipts from credit repayment 2.219.227,17 1.830.188,53 82,47 Expenditures 110.311.114,99 98.409.765,94 89,21 Current 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 97,71 Net wages 10.360.279,81 10.107.488,98 97,56 Income tax 2.301.626,47 2.260.427,36 98,21 Contributions payable by the employee 3.023.346,66 2.979.810,47 98,56 Contributions payable by the employer 2.607.789,86 2.532.163,96 97,10 Municipal taxes 308.164,22 295.175,10 95,79 Other personal income 3.599.500,61 3.230.514,00 89,75 Material and service expenses 12.240.926,99 12.418.420,43 101,45 Current maintenance 3.918.533,40 3.713.985,96 94,78 Interests 375.117,34 257.705,61 68,70 Rent 348.221,59 259.703,66 74,58 Subsidies 481.176,49 431.374,72 89,65 Other expenditures 1.125.586,13 1.153.253,04 102,46 Transfers for social protection 225.679,35 235.186,41 104,21 Transfers to institutions, individuals, non-government and 15.214.897,51 13.611.620,32 89,46 public sector Transfers to public institutions 4.094.419,93 3.683.282,85 89,96 Transfers to non-government organisations 2.786.759,18 2.555.736,85 91,71 Transfers to individuals 1.545.849,76 1.357.852,79 87,84 Transfers to municipalities 582.858,53 520.831,89 89,36 Transfers to public enterprises 6.205.010,10 5.493.915,94 88,54 Capital expenditures 49.316.646,17 40.913.089,66 82,96 Loans and credits 971.652,52 445.697,01 45,87 Reserves 3.891.969,87 3.564.149,25 91,58 Deficit -12.168.295,39 6.479.853,17 -53,25 Financing 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 5.816.143,42 108,58 Foreign 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 22,04 Revenues from privatisation 27.410.268,17 38.547.984,00 140,63 Transfers 2.137.983,39 1.192.169,21 55,76 Increase/reduction of deposits -4.176.845,07 -30.425.972,70 728,44

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

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 52,09 Taxes 719,73 33,40 Contributions 257,27 11,94 Duties 34,55 1,60 Compensations 69,24 3,21 Other revenues 29,89 1,39 Receipts from credit repayment 11,95 0,55 EXPENDITURES (I level of consolidation) 1056,85 49,04 EXPENDITURES (II level of consolidation) 1015,49 47,12 CURRENT PUBLIC SPENDING 906,55 42,07 Current expenditures 482,28 22,38 Gross salaries and contributions payable by the employer 279,16 12,95 Other personal income 29,32 1,36 Material and service expenses 99,77 4,63 Current maintenance 26,85 1,25 Interests 20,63 0,96 Rent 6,06 0,28 Subsidies 13,86 0,64 Other expenditures 6,63 0,31 Transfers for social protection 319,93 14,85 Transfers to institutions, individuals, NGO and public sector 75,44 3,50 Capital expenditures 150,30 6,97 Loans and credits 11,33 0,53 Repayment of guarantees 2,11 0,10 Reserves 15,45 0,72 DEFICIT / SURPLUS 65,78 3,05 Financing -65,78 -3,05 Domestic financing -60,72 -2,82 Foreign financing -52,52 -2,44 Donations 1,61 0,07 Project loans 4,00 0,19 Revenues from privatisation or deposits 62,24 2,89 Increase/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.

65,78

1.122,63 1.056,85

PublicJavni revenuesprihodi Javnipublic expensesrashodi Višaksurplus prihodaof 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

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