Montenegro should address its public debt issues through pension reform to safeguard the economy, the International Monetary Fund (IMF) said.

In its concluding statement after a two-week visit to evaluate Montenegro’s economy, IMF said the country’s growth is projected to be 3 per cent in 2019, down from almost 5 per cent in 2018.

Among the main points of the statement, IMF said economic growth has been strong, and fiscal adjustment has improved budget balances, but that high public debt limits the government’s room to “counteract possible future downturns”.

It noted that with global growth prospects increasingly uncertain, government debt needs to be further reduced.

“Over the next few years, strong progress in three specific areas will further build fiscal space. One very important reform would be on pensions – aligning them with increasing lifespans and making future benefits fairer to today’s youth,” the lender said.

It also noted that overhauling public employment to enhance the efficiency of the public sector is another high priority reform and that progress on employment and pensions needs to be “reinvigorated”.

“A third area where the authorities do envisage near-term progress is eliminating wasteful tax exemptions. If efforts are redoubled in these areas, there will be strong long-term rewards, and the fiscal situation would provide a much more robust foundation for ambitious projects.”

Other main points in the conclusion included that the cost and benefits of the Bar-Boljare highway in the near term need to be analysed, as a rush to complete the project could leave the economy vulnerable to shocks, which would prevent the allocation of resources to education, health and public infrastructure.

Furthermore, additional efforts are needed to strengthen the financial system to better support higher investment and living standards, while bank supervision and Anti-Money Laundering (AML/CFT) need further enhancement.

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