Delegation of Montenegro at Annual Meetings of the World Bank and the IMF

20/10/2019

During the third day of stay at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank, the delegation of Montenegro led by the Minister of Finance, Mr. Darko Radunović, and the Governor of the CBCG, Mr. Radoje Žugić, met with the Director of the IMF’s European Department, Mr. Paul Thomsen. The topics of the meeting were fiscal policy results and banking sector trends in 2019.

The Minister of Finance highlighted that strong economic growth contributed to the budget revenues increase, and that the implementation of fiscal consolidation measures continued. He noted that the fiscal deficit declined, and the Government aims at decreasing the public debt level below 60% of GDP in 2022. This would also benefit from the recently successful issue of Eurobonds, collecting funds for refinancing a part of public debt in 2020. During the meeting, the Minister of Finance showed appreciation to the IMF for the technical assistance for preparing the Eurobonds issue, as well as for the overall IMF technical assistance to Montenegro.

Governor Žugić pointed out that the financial system became stronger after the resolution of two non-systemically important banks, as reflected through the increase in all key operation ratios. The positive trend in deposits growth and lending activity continued, with the simultaneous decline in non-performing loans and interest rates. Governor Žugić informed the Director of the IMF’s European Department on activities related to the harmonisation of national legislation with the EU Directives. The activities mentioned include supervision of credit institutions, and the macro-prudential measures for regulating the level of consumer loans, improving capacities for money laundering prevention, and plans for implementing the banking system’s asset quality review (AQR) in 2020, which would complete the fulfilling of FSAP 2016 recommendations. The Governor also thanked to the IMF for the technical assistance provided in strengthening the supervisory capacities.

Director Thomsen welcomed the positive trends and future efforts of the CBCG, both in strengthening capacities for combating the money laundering and terrorist financing, and in focussing to implement the institutional framework for banking supervision and resolution in line with future regulations.

At the working lunch with finance ministers and governors of central banks of Central, Eastern and South-Eastern Europe titled “Europe - Perspectives and Policies”, Director Thomsen presented the IMF’s views on the slowed growth spillover from developed EU economies, especially industrial output, to developing economies in the EU and Southeast Europe. The IMF forecasts that the growth slowdown in developed EU countries will affect the growth of developing countries in the EU, Central, Eastern and South-Eastern Europe, with the slowdown pace depending on the materialization of shocks resulting from (not)resolving the Brexit issue, the growth of trade protectionism and growing geopolitical tensions. In this regard, it was concluded that, in addition to relying on expansive monetary policy, developed EU countries must focus their attention on structural reforms such as increased labour force participation, improving the quality of human capital and improving public sector efficiency.