Bonds issued on the domestic market will provoke multiple economic effects and will have positive impact on the state – the state will get money and clients will have the interest. In addition, stock exchange and brokers will also reap the benefits, explains Professor Božo Mihailović, President of the Association of Economists of Montenegro.
He thinks that the remaining bonds, whose value is estimated to be €50 million, should be offered with a seven-year maturity deadline and 3,5% interest.
The state has recently issued bonds worth €190 million and raised more than €140 million for the purposes of budget financing.
“When the state needs money, I think that’s a right move. Firstly, because that way, funds are being united. Safety and the determined interest can’t be a problem in such situations – it’s the inflation rate that might pose a problem. If the inflation rate exceeds the interest rate, there’s a loss on substance and citizens take the risk in that context”, explains Mr Mihailović.
However, the state’s debts are now at much lower interest rate.
“The transaction costs stay in the country now. Issuing bonds on domestic market is a right decision – far more desirable than indebtedness abroad. As far as the number of shares sold is concerned, it tells us that there’s trust in the state and the institutions. If the remaining bonds were offered for a seven-year period and with higher interest, buyers would be more motivated”, said Mr Mihailović.
The individual bond price amounted €1.000.
“It was another good move as more citizens were attracted. That means even the citizens with weaker purchasing power were able to afford to buy bonds. That’s more rational, better solution”, said Mr Mihailović.
Professor Mihailović also spoke about the economic growth in Montenegro and everything that has been done in our country for the last 13 years.
“Montenegrin economy is boosting and is showing an upward trend. In the last tow years, growth rates were by 2,5 times higher in comparison to the EU average”, says Mr Mihailović.
Economy is expected to soar this year too.
“The growth will depend on the tourism season. I expect growth in industry and construction. I expect higher growth than the one projected by international institutions, but probably slightly lower than it was last year”, says Mr Mihailović.
After 13 years of independence, Montenegrin economy showed its economic sustainability. In addition, some significant quality changes in the economy and society have occurred.
“General assessment requires integral examination of all economic activities. We have achieved slightly less than it was really possible. Montenegro has undergone a transformation of social and economic structure”, says Mr Mihailović.
All this, as Professor says, has been achieved in very turbulent times. A severe economic crisis arose in 2008 and it’s not over yet.
“In the last two years Montenegro has found a great consolidation and development connection, based on great investments. Economic development has been based on investments recently”, said Mr Mihailović.
He says that Montenegro must keep maintaining that level of investment attractiveness high as there’s not enough accumulation for more powerful development.
“Its very good that Montenegrin economy is very tough and vital. There are a lot of things going on here. Nothing’s perfect but Montenegro has definitely achieved positive results”, says Mr Mihailović.
However, there are many problems than need to be tackled.
“One group of problems refers to strengthening macroeconomic stability. Montenegro hasn’t gone into indebtedness for current consumption and that’s a good thing. Current consumption must not be financed from the borrowings anymore. Nobody can do that”, says Professor.
In his opinion, Montenegro has to continue restructuring its economy.
“Montenegro shouldn’t rely on tourism only. Tourism should be connected to agriculture. Our products are exceptional, high-quality. We should also scale down administrative barriers as they usually impose severe restrictions on business”, explains Mr Mihailović.
One of the great challenges is poor export and excessive import.
“We’ve always had this problem but there are positive trends in this area which keep the Montenegrin economy live. Although there are seven or eight water production factories in Montenegro, it pays millions for its import. This problem needs to be solved”, says Mr Mihailović.
He adds that new strategy for economic development requires serious and in-depth discussion on the basis of real economy.
