Economic analyst, Mr Vasilije Kostić, estimated that the announcement of the ban on the construction of small hydro power plants will discourage further investments in that segment of energy, but also that “the consequences of that announcement can certainly exceed the microeconomic level.”
“I will list only some of them. The first and immediate consequence could be on the budget – those who have built in accordance with lex legis so far are likely to be compensated, which is directly contrary to the need to stabilize the budget. In addition, it is questionable how this corresponds to the need to develop the energy sector and our need to meet domestic electricity needs; then it directly increases the uncertainty of investments, both domestic and foreign, and it is known what investments mean for our economy “, Mr Kostić said in an interview for Dnevne novine, commenting on yesterday’s exposition of the future Prime Minister, Mr Zdravko Krivokapić.
How much attention has Mr Krivokapić devoted to the economy, given the fact that he only mentioned borrowing?
Mr Kostić: The new prime minister-designate and future prime minister did not devote much attention to the economy in the exposition, except for only a few general observations, which, of course, does not mean that economic issues will not be given due care. It’s rather a reflection of political need to attract as much public attention as possible with the content of the exposition and to emphasize the discontinuity with the previous government at all costs. To that end, general points about: prosperity, freedom, equality, progress, etc. are emphasized, while uninteresting and incomprehensible economic issues are at least unsuitable for such a thing. In any case, the degree of dealing with the economy and the Government and us, of course, will be in undiminished intensity.
How much will the ban on the construction of small hydro power plants will discourage investments in energy sector? And what about the abolition of economic citizenship?
Mr Kostić: It is quite certain that the announcement of the ban on the construction of small hydroelectric power plants will discourage further investments in that segment of energy, but the consequence of that announcement can certainly exceed the microeconomic level. In complex systems such as the economic system, unilateral decisions, that ere even generalized (they apply to all cases), never affect only what is their target. Such actions could rightly be said to hit the target, but miss the goal. What is it about? If you want to stop the construction of small hydro power plants, for many reasons indeed, the main of which is environmental protection, then the proclamation of a general ban, in addition to the desired consequence, has many other potential consequences. With uniform decisions of this type (it also refers to economic citizenship) without respecting the specifics, there is no objective approach, so in addition to those that need to be “cleaned”, those that produce benefits or contribute to development are “cleaned” as well.
What are the consequences for small plants?
Mr Kostić: The first and immediate consequence could be for the budget – those who have built in accordance with lex legis so far are likely to be compensated, which is directly contrary to the need to stabilize the budget. In addition, it is questionable how this corresponds to the need to develop the energy sector and our need to meet domestic electricity needs; then it directly increases the uncertainty of investing both domestic and foreign, and it is known what investments mean for our economy.
I want to say that in the midst of any process, and the process of building mini hydropower plants is such, one should refrain from making general, unilateral decisions (such as banning the construction of mini hydropower plants) that do not respect reality or specificity but act as a “universal broom”, cleaning everything. Due to the high degree of interdependence in the economic system, every decision, even the decision related to mini hydro power plants, must be considered from the aspect of the impact it produces or can produce.
The future prime minister has announced borrowing of at least €500 million. What will the budget be then: social or development?
Mr Kostić: The Prime Minister only announced a fact that is less known to the entire public and which is, of course, a consequence of everything that has happened so far. The need to borrow or provide the missing funds is a necessity, which he announced as the need of his cabinet to provide funds. It is difficult to talk about the development budget in a given situation. Rather, an adequate description of the situation would be the struggle for sustainability or stabilization of public finances.
In your opinion, is payment of salaries and pensions jeopardized?
Mr Kostić: So far, the liquidity of the budget has been maintained at a high price. Whether it will be like that in the future depends predominantly on providing the missing funds and on ending the COVID-19 crisis.
Is it possible to talk about restructuring Montenegrin economy?
Mr Kostić: One can, of course, talk about the restructuring of the Montenegrin economy, especially since it is one of the ways out of the crisis in the long run. As I have already said, the complexity or presence of a high level of interdependence between the processes and categories of the economic system dictates that you deal with what is necessary, but success in this business determines your move to a higher level, where long-term tasks can be realized.
If you were Prime Minister, what would be your first move?
Mr Kostić: Providing the missing funds is a condition of all conditions. I have already spoken on the topic of the IMF and said that no possibility should be ruled out, not even this one, especially having in mind the economic situation we are in, not to mention the health situation. Some did not understand that, so they ironically asked: “And what are the other occasions when an arrangement is made with the IMF”? So let me explain. There are many different situations in which countries decide to make an arrangement with the IMF, but the severity of that situation is significantly different, so some are left with nothing else, and others have other options.
How real is the arrangement with IMF?
Mr Kostić: Tough situations, such as ours, do not offer many options, so the arrangement with the IMF should not be ruled out in advance, and should it be avoided, provided that such an option is available to us because I doubt that stabilization program would not contain significant restrictions when it comes to citizens’ incomes (salaries and pensions), that would greatly downgrade the already low standard of living of citizens, which, along with the existing political divisions and tensions, could cause social tensions.
