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IMF Country Report No. 22/166
MONTENEGRO
TECHNICAL ASSISTANCE REPORT – PUBLIC INVESTMENT MANAGEMENT ASSESSMENT
June 2022
This Technical Assistance Paper on Montenegro was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed in July 2021.
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Title page
FISCAL AFFAIRS DEPARTMENT
Montenegro
Arturo Navarro, Bojan Pogacar, Eduardo Aldunate, Mary Betley, Willie Du Preez, and Milan Lakicevic
Frontmatter Page
The contents of this report constitute technical advice provided by the staff of the International Monetary Fund (IMF) to the authorities of a Montenegro (the "TA recipient") in response to their request for technical assistance. This report (in whole or in part) or summaries thereof may be disclosed by the IMF to IMF Executive Directors and members of their staff, as well as to other agencies or instrumentalities of the TA recipient, and upon their request, to World Bank staff and other technical assistance providers and donors with legitimate interest, unless the TA recipient specifically objects to such disclosure (see Operational Guidelines for the Dissemination of Technical Assistance Information— http://www.imf.org/external/np/pp/eng/2013/061013.pdf).
Disclosure of this report (in whole or in part) or summaries thereof to parties outside the IMF other than agencies or instrumentalities of the TA recipient, World Bank staff, other technical assistance providers and donors with legitimate interest shall require the explicit consent of the TA recipient and the IMF’s Fiscal Affairs Department.
Contents
ACRONYMS PREFACE EXECUTIVE SUMMARY I. PUBLIC INVESTMENT IN MONTENEGRO A. Public Investment and Stock of Capital B. Composition and Financing of Public Investments C. Bar-Boljare Highway II. EFFICIENCY OF PUBLIC INVESTMENT IN MONTENEGRO III. PUBLIC INVESTMENT MANAGEMENT INSTITUTIONS A. The PIMA Framework B. Overall Assessment C. Investment Planning D. Investment Allocation E. Investment Implementation IV. CROSS-CUTTING ISSUES A. Legal Framework B. IT Systems and Data Management C. Capacity Building BOXES 2.1. Public Investment Efficiency Frontier and Gap 3.1. Regulatory Improvements in PIM 3.2. Mechanisms that Support Coordination with SNG FIGURES 1.1. Capital Stock in Montenegro 1.2. Deficit, Debt and Public Investment 1.3. Current and Capital Expenditures 1.4. Execution of the Capital Budget 1.5. Foreign Debt Stock Composition 1.6. Public Investment 1.7. Guarantees Extended to SOEs for Investment Projects 1.8. PPP Capital Stock (2019) 1.9. Public Investment by Function 1.10. Public Investment per Program and Implementing Entity 2.1. Measures of Infrastructure Access 2.2. Perception of Infrastructure Quality 2.3. Efficiency Frontier and Gap – Quality Output Indicators 3.1. PIMA Framework Diagram 3.2. Design of Public Investment Management Institutions 3.3. Effectiveness of Public Investment Management Institutions 3.4. Fiscal Rules Compliance 3.5. Policy Planning System in Montenegro 3.6. Credibility of Medium-Term Ceilings Over Time 3.7. Deviations in Capital Investments Between Outturns and Planned 3.8. Maintenance Spending on Infrastructure 3.9. Planned and Actual Infrastructure Maintenance Expenditures TABLES 1.1. Summary Assessment 1.2. Summary of Recommendations 3.1. Fiscal Rules in Montenegro 3.2. Main Institutional Responsibilities for Capital Budget Projects APPENDICES I. Proposed Action Plan II. PIMA Questionnaire III. Stepwise Project Appraisal in Chile IV. Illustration of Gateway Process for PPPs and Public Investments V. Service Agreements for Project Implementation VI. Maintenance Planning and Budgeting Implications of Large and/or Complex Projects VII. Two Lists of Projects, Different Selection Process and Criteria VIII. Common Elements of a Project Implementation Plan IX. Overview of Legal Framework related to PIMA Institutions X. Overview of PIM-Related IT Systems
Acronyms
| ARS | Asset Registry System |
| BBH | Bar-Boljare Highway |
| BMS | Budget Management System |
| BOT | Build Operate Transfer |
| CA | Contracting Agency |
| CDPA | Cadastre and State Property Administration |
| EBRD | European Bank for Reconstruction and Development |
| EME | Emerging Market Economies |
| EPCG | Elektroprivreda Crne Gore (state-owned electricity company) |
| ERA | Energy Regulatory Agency |
| FMIS | Financial Management Information System |
| FPG | Fiscal Policy Guidelines |
| IPA | Instrument for Pre-Accession Assistance |
| LBFR | Law on Budget and Fiscal Responsibility |
| LPCP | List of Priority Capital Projects |
| MIA | Investment Agency of Montenegro |
| MOF | Ministry of Finance and Social Welfare |
| MTBF | Medium-term Budgetary Framework |
| MTEF | Medium-term Expenditure Framework |
| MTFF | Medium-term Fiscal Framework |
| NIC | National Investment Committee |
| NIPAC | National IPA Coordinators |
| PFM | Public Financial Management |
| PIM | Public Investment Management |
| PIMA | Public Investment Management Assessment |
| PIMIS | Public Investment Management Information System |
| PPP | Public-Private Partnership |
| SAI | State Audit Institution |
| SNG | Subnational Government |
| SOE | State-Owned Enterprise |
| SPP | Single Project Pipeline |
| SRA | Strategic Relevance Assessment |
| SSPP | Sector Single Project Pipelines |
| SWG | Sector Working Group |
| ToR | Terms of Reference |
| TSA | Treasury Single Account |
| ZPCG | Zeljeznicki Prevoz Crne Gore (state-owned passenger railway company) |
Preface
In response to a request from the Ministry of Finance and Social Welfare (MoF), Staff from the IMF’s Fiscal Affairs Department (FAD) undertook a remote Public Investment Management Assessment (PIMA) during June 16 - July 12, 2021. The PIMA was conducted remotely given health and travel related restrictions in place at the time due to the COVID-19 pandemic. The mission comprised Arturo Navarro (Head, FAD), Bojan Pogacar (Regional Advisor, FAD), Eduardo Aldunate, Mary Betley, and Willie Du Preez (All Experts, FAD), and Milan Lakicevic (Economist, World Bank).
The tasks of the mission were, to: (i) assess Montenegro’s public investment management framework; (ii) assist the authorities to prepare a reform strategy and prioritized action plan for strengthening the management of public investment; and (iii) recommend follow-up areas of technical assistance that could be provided by FAD or other development partners.
At the Ministry of Finance and Social Welfare, the mission met with Ms. M. Kasalica, State Minister; Mr. B Paunovic, Director General; Ms. S. Buric, Head of Public Investment Unit; and representatives from the Directorate for Budget and Accounting; the Public Debt Management Office; the Directorate for Local Self-Government and State-Owned Enterprises; the Directorate for Economic Policy Development. The mission also met with representatives from the Public Works Administration; the Ministries of Ecology, Spatial Planning and Urbanism, Education and Health; Ministry of Capital Investments and Transport Administration; the Property and Cadastre Administration; the National IPA Coordinators Office; the State Audit Institution and ElectroPriveda (Energy) Corporation.
The mission also met: Mr. M Sosic of the Institut Alternativa, Mr. D. Hristov of the European Commission, Mr. J Sprey of the European Bank for Reconstruction and Development, and Mr. A Pamnani from the European Investment Bank.
The mission is grateful to the authorities for the frank and open discussions and close cooperation. The mission also expresses its appreciation to Ms. Slobodanka Buric and Ms. Virgjina Zadrima from the MoF, for their outstanding support; and to Ms. T. Jurlina, Ms. M. Biljuric, and Ms. N. Stojovic, for their excellent translation assistance.
