In the forthcoming period, Central Bank of Montenegro will probably work on increasing the growth rate of the Montenegrin economy, since, in the first quarter of this year, great number of sectors recorded significant growth – which exceeded the expectations, said the Governor of the Supreme monetary institution, Radoje Žugić.
Journalists asked Žugić whether the recent contract on the financial arrangement between Montenegro and the World Bank, as well as the bond issue are a good way of solving problems in state finances, and he said that solving these problem was a program of fiscal consolidation adopted by the Government and which is currently being implemented.
“This program envisages significant savings which will bring the public debt back to sustainable level. Although the increase of public debt isn’t a good thing, not every debt should be considered as a negative thing. The first important component of public debt arose as a consequence of the highway construction. I don’t think investing in infrastructure is a bad thing since it will bring economic benefits and increase traffic safety”, said Žugić.
On the other side, part of the public debt was a consequence of the countercyclical fiscal policy, applied in the fight against recession which hit Montenegro during the years of the global financial crisis.
“If we hadn’t implemented that countercyclical policy, the consequences of the crisis would have been much worse. Besides, the same policy was implemented by many countries of the Eurozone”, said Žugić.
As far as the normalization of the monetary policy implemented by central banks and its influence on the banks in Montenegro, Žugić thinks that it should be conducted in phases and transparently. Its influence on the banks in Montenegro won’t be significant though, because the banks are capitalized, very liquid and with less vulnerabilities in comparison to the several years before.
