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Interview of the Minister of Finance, Milorad Katnić, for Reuters

Interview of the Minister of Finance, Milorad Katnić, for Reuters
Published date: 20.07.2012 13:36 | Author: Ivona Mihajlović - administrator

Ispis Print

PODGORICA, July 18 (Reuters) - Montenegro wants to boost growth through investments, undergo fiscal consolidation and cut state spending by the end of 2012 and in 2013 to offset economic downturn and secure growth, its finance minister said in an interview.

The tiny Adriatic country of only 680,000 set its 2012 growth forecast at only 0.5 percent of gross domestic product (GDP), while its debt reached almost 50 percent of GDP as the euro zone crisis and loss-making state-owned industries weighted on its economy.

In June, the European Union governments agreed to start accession talks with Montenegro and Katnic said both debt and deficit of about 2.5 percent of GDP were in line with the so-called Maastricht criteria set for EU membership aspirants. 

 "What we need now is to cut debt through fiscal consolidation that should rein-in deficit," Katnic told Reuters on Tuesday. "Savings were necessary ...  but now we should focus more boosting growth through investments in capital projects." 

As part of its recovery measures the country has also started a set of social reforms to combat unemployment of 12 percent, the minister said. 

Montenegrin economy is heavily reliant on tourism and real estate industry along its Adriatic coast, but its three years of economic boom followed country's peaceful secession from Serbia in 2006, ended amidst global economic crisis.  

Earlier this year Montenegro has decided not to seek a precautionary loan deal with the International Monetary Fund after securing financial stability for 2012 and turned to the World Bank for borrowing to fund its budget.  

 "World Bank's funds were affordable and in line with reforms we are undertaking ... the IMF gave us recommendations uniform for most countries and we believed that some of them could be more negative than positive, even if their funds could have been cheaper," Katnic said. 

 Montenegro has a set its borrowing plan for 2012 at the total of 308 million euro and it already secured about 85 percent of its needs from the World Bank and Credit Suisse <CSGN.VX>.  

Montenegro which in 2010 and 2011 sold two Eurobond tranches worth 380 million euro was not considering another launch as market conditions proved unfavorable, Katnic said. 

The country which will face early parliamentary vote this fall as its ruling Democratic Party of Socialists seeks a fresh mandate before tackling EU accession talks, is also weighted with sovereign guarantees for its loss-making aluminium and steel producers. 

This year it took on debt of 32 million euros from the bankrupt Zeljezara Niksic steel mill which in April was sold to Turkey's  Toscelik Profil ve Sac Endustrisi AS for 15.1 million euros.

 "We expect about 30 million euro in revenues from sales of some of company assets and its restructuring," Katnic said. 

The government in Podgorica also assumed maturing debt of another 132 million euros for the loss-making aluminium producer Kombinat Aluminijuma Podgorica (KAP). 

In February the government said it will fully take over the company in which it equally shares a 58 percent stake with the EN+ group of Russian billionaire Oleg Deripaska.

"We are looking how to solve this ... so far three companies have expressed interest in the purchase of a stake in KAP and we'll see how it goes," Katnic said.

The minister said he hopes investments in real estate, tourism and energy sector would bring Montenegro more revenues to help the country to offset effects of the crisis.

Earlier this month Azerbaijani state-run oil company SOCAR has pledged some 260 million euros ($320 million) to Montenegro to turn a former military base into a coastal tourist resort for its workers. Last year the Qatari real estate investment company Qatari Diar announced plans for a 250 million euro ($338 million) resort in the coastal town of Tivat, already the site of Canadian billionaire Peter Munk's Porto Montenegro marina complex.