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Dec 21, 2017 12:41 EEST
December 21 (SeeNews) - The World Bank has said it approved a 80 million euro ($95 million) guarantee to support a package of reforms to strengthen public finance and financial sector resilience in Montenegro.
The reforms are supported through a Policy-Based Guarantee (PBG) which will aim to secure two to three times larger private finance and allow for orderly refinancing of the existing debt liabilities towards commercial creditors, the World Bank said in a statement late on Wednesday.
"We welcome the Government’s commitment and actions to put Montenegro back onto a sustainable macro-fiscal trajectory," World Bank Country Manager for Montenegro Emanuel Salinas said. "I am confident that Montenegro, with support from the World Bank, and other development partners, will overcome today’s challenges and achieve strong sustained and inclusive growth based on private investment and jobs over time".
The programme aims to increase tax revenues and cut government spending from an excessive level of 47% of gross domestic product (GDP). Additionally, labour force participation will increase from one of the lowest shares across European countries of less than 55%. The share of non-performing loans (NPLs) is expected to decline further and banking supervision and resolution frameworks will be strengthened in line with the Basel Core Principles and EU Bank Recovery and Resolution Directive, the World Bank said.
"Without the reforms supported by this programme, the fiscal adjustments would be abrupt and likely more harmful for the poor", World Bank Senior Economist Sanja Madzarevic-Sujster said. "Reducing the deficit will not be easy, but is of utmost urgency given the need to reassure markets and allow for a successful rollover of existing obligations which amount to around 16 percent of GDP a year."
Some of the reform measures supported under the program relate to a reduction in government officials’ wages, an introduction of centralised procurement, regulation of supervision of the non-banking financial sectors, as well as reforming the pharmaceutical market aiming to strengthen access and affordability.
The World Bank portfolio of active projects in Montenegro now includes 6 programmes, totalling $229 million. Areas of support include energy efficiency, education, agriculture, environment and revenue administration.
($ = 0.841635 euro)
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