## 2.   Data Source for Portfolio Investment Position by Sector

## Source details

**Canonical URL:** [2.   Data Source for Portfolio Investment Position by Sector](https://www.imf.org/-/media/files/publications/cr/2020/english/1mneea2020001.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2020/english/1mneea2020001.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2020/english/1mneea2020001.pdf.json)

---

### Data sources for portfolio investment by sector
- Deposit-taking corporations (DTCs): portfolio investment data are obtained from the monetary and financial statistics (MFS) and are cross-checked with information from the International Transactions Reporting System (ITRS).
- Other financial corporations (OFCs): data collection started in 2019 on a pilot basis targeting leasing and micro-financing corporations. CBM plans to expand coverage to insurance corporations, investment funds, and pension funds by 2021.
- General government: portfolio investment data are obtained from the Ministry of Finance (MOF).
- Non-financial corporations and households: portfolio investment position data are estimated by accumulating transaction (flow) data from the ITRS; flow data are not adjusted for price and foreign exchange rate changes because the CBM assesses the investment as not significant.

### Government securities and custodial information
- The size of liabilities for the general government (Eurobonds issued by the government) recorded in Montenegro’s IIP was twice as large as the mirror data (debt security liabilities for all sectors) in the Coordinated Portfolio Investment Survey (CPIS).
- Mission suggestion: adjust Eurobonds issuance data with ITRS information to reflect residents’ purchases of the Eurobonds.
- CBM lacks sufficient information to make the adjustment; CBM and MOF requested that the MOF obtain information on Montenegrin residents’ holdings of the Eurobonds from the custodian in London.
- Once custodian information is received, CBM and MOF should exclude that amount from the IIP and External Debt Statistics (EDS). If the MOF and CBM cannot revise the data, the inconsistency should be explained in the metadata.
- On a discounted government note issued in late 2019, the mission advised recording accrued interest for the note and financial service fees paid to the arrangers.

### Use of CPIS mirror data and quarterly compilation guidance
- Mission provided guidance on using the IMF’s CPIS portal to review liabilities in equity securities with mirror data reported by partner countries.
- Review found mirror data in the CPIS for end-2018 were almost twice as large as the data recorded in Montenegro’s IIP.
- Mission recommended that the CBM use the mirror data from the CPIS to record liabilities in equity securities.
- To produce quarterly data with a lag of one quarter (given the CPIS is a semi-annual exercise with a lag of nine months), the CBM should adjust CPIS-based data using information from the ITRS.

### Recommendations (extracted from portfolio investment discussion)
- Switch to using MFS data for OFCs once data collection is fully implemented, instead of accumulating flow data from the ITRS (target expansion by 2021).
- Adjust Eurobond issuance data to account for residents’ holdings using custodian information; exclude resident-held amounts from IIP and EDS or explain in metadata if revisions are not possible.
- Use CPIS mirror data to record liabilities in equity securities and adjust CPIS-based figures with ITRS for quarterly compilation (to achieve quarterly data with a one-quarter lag).

*Source: IMF technical assistance report excerpt (Montenegro).*

---

### 18. In the medium term, position data for non-financial corporations and households

### Portfolio investment positions — findings
- Position data for non-financial corporations and households should be collected directly rather than accumulating transaction data from the ITRS to avoid accumulation of errors from price and exchange rate changes.
- Montenegrin enterprises are required to register the securities they issue at the Montenegrin depository of securities (potential source for portfolio investment liabilities).
- Coverage of existing report forms (e.g., the direct investment survey or the loan asset and liability survey) could be expanded by adding questions on portfolio investment positions.

### Portfolio investment positions — recommendations (with priorities and deadlines)
- Compile quarterly portfolio investment position data and submit them to STA for review (top priority by December 2020).
- Source the data for OFCs from the MFS and discontinue estimating the position data by accumulating flow data from the ITRS (medium priority by December 2021).
- Record equity liabilities of non-financial corporations using the data from the CPIS with adjustments based on the information from the ITRS (high priority by June 2020).
- Revise the data on Eurobonds issued by the government to reflect residents’ holdings. In case the data cannot be revised, explain it in the metadata (high priority by December 2020).
- Investigate the information available at the Montenegrin depository of securities to use it as a source to record portfolio investment liabilities (medium priority by December 2021).
- Explore expanding the coverage of the direct investment or the loan asset and liability survey to collect information on portfolio investment positions (medium priority by December 2021).

### Table 2. Data Source for Portfolio Investment Position by Sector (summarized)
- General Government: Assets — Not Applicable; Liabilities — MOF
- Deposit-taking Corporations: Assets — MFS; Liabilities — MFS
- Other Financial Corporations: Assets — ITRS; Liabilities — ITRS
- Non-Financial Corporations, Households, and Non-Profit Institutions Serving Households: Assets — ITRS; Liabilities — ITRS (CPIS with adjustments for equity liabilities by June 2020)

### Financial derivatives — findings and recommendation
- Findings:
  - CBM currently includes small positions of financial derivatives in other account receivable/payable.
  - Positions of financial derivatives can be separately available in the MFS for 2019 and forward.
  - Government is considering entering into financial derivative contracts to hedge exchange rate risk on US dollar loans financing a highway project (loans made by the Chinese government).
- Recommendation:
  - Start recording positions of financial derivatives in IIP. If the ITRS captures transaction data on financial derivatives, record them in balance of payments (medium priority by June 2020).

### Other investment — findings
- Deposits assets and liabilities for DTCs are sourced from the MFS.
- Around 50 largest enterprises are requested to fill out report form Form RN-1 monthly to report transactions and positions at accounts held abroad.
- CBM uses Locational Banking Statistics (LBS) compiled by BIS to capture deposits for enterprises and individuals not submitting Form RN-1; LBS provides position data and changes excluding exchange rate fluctuations.
- CBM assesses that deposits with nonresident banks not covered by LBS or Form RN-1 (e.g., households’ deposits with Serbian banks) are not significant.
- Data on loan assets and liabilities:
  - Form KO-1 (loan assets): submitted by around 60 enterprises; total amounted to around 30 million euro.
  - Form KZ-1 (loan liabilities): submitted by around 1,500 enterprises; total amounted to 2 billion euros.
- Pilot survey to capture trade credit and advances launched in 2019: around 20 enterprises responded; selection based on customs and ITRS gaps.

### Other investment — recommendations (with priorities and deadlines)
- Compile quarterly other investment position data and submit them to STA for review (top priority by December 2020).
- Use the LBS data to supplement the data reported by Form RN-1 for other sectors’ deposit positions in IIP (medium priority by June 2020).
- Start recording data on trade credit and advances based on the survey results (medium priority by December 2021).

### Table 3. Data Source for Main Items in Other Investment (comments summarized)
- Euros circulating in Montenegro: MFS and information from neighboring countries; deposits in euros are divided by ratio of currency in circulation to deposits obtained from neighboring countries.
- Deposits: MFS/LBS/Form RN-1; data from LBS should be used for positions as well as transactions to supplement Form RN-1.
- Loans: MFS/Forms KO-1 and KZ-1; coverage of report forms could be expanded to include portfolio investment positions.
- Trade credit/advances: General government — Report from the MOF; Other sectors — New survey; pilot survey results should be reviewed.

### Reserve assets — findings and recommendation
- Findings:
  - CBM and mission agreed that small holdings of Deutsche Mark and Austrian Schilling banknotes kept in CBM vault for many years should not be included in reserve assets.
- Recommendation:
  - Remove holdings of Deutsche Mark and Austrian Schilling banknotes from reserve assets. They should not be included in reporting to the IMF for the international liquidity and the survey for Currency Composition of Official Foreign Exchange Reserves (medium priority by March 2020).

### IIP currency composition — findings and recommendation
- Findings:
  - MFS provides currency composition information distinguishing euros and other foreign currencies for most banks’ external assets and liabilities.
  - Direct investment report forms and Forms KO-1 and KZ-1 include currency denomination.
  - Form RN-1 and the trade credit survey do not include currency information but include counterpart countries, enabling estimation of currency denomination.
  - Currency composition information on assets (other than reserve assets) and liabilities of the CBM and general government is available from CBM Accounting Office and MOF.
  - Items lacking currency composition can be recorded under “unallocated” in report form to STA.
- Recommendation:
  - Compile a preliminary version of the currency composition table required by Appendix 9 of BPM6 and submit them to STA (medium priority by December 2020).

### Consistency between IIP and balance of payments — findings and recommendation
- Findings:
  - Mission conducted a quality check of IIP data first disseminated in 2019; confirmed quality and re-disseminated them.
  - A file to check consistency between balance of payments and IIP indicated a few inconsistencies (e.g., loans made by other financial corporations’ assets).
  - CBM identified errors, contacted reporters to revise data, and received guidance on recording transactions and positions when guarantees are activated and government repays debt on behalf of defaulted enterprise.
- Recommendation:
  - Continue to check the consistency between balance of payments and IIP data (high priority on ongoing basis).

### Reserves Data Template (RDT) — findings and recommendations
- Findings:
  - RDT covers reserve assets, future pre-determined inflows/outflows (Section II), contingent assets/liabilities (Section III), and additional information related to reserve assets (Section IV); includes positions and transactions for both central bank and central government with resident entities.
  - Montenegro is fully euroized but not part of the Eurosystem; euros circulating in Montenegro are foreign currency assets; most reserve assets denominated in euros, complicating RDT scope.
  - Mission recommended recording foreign currency asset positions and scheduled payments that emanate from balance sheet and off-balance sheet positions of central bank and central government per paragraph 141 of RDT Guidelines; exclude expected payments/receipts not emanating from balance sheet/off-balance sheet positions (e.g., regular government spending, expected tax revenues).
  - Two templates recommended: one for CBM and one for central government.
    - RDT for central bank: Section I.A — reserve assets; Section I.B — holdings of Eurobonds issued by central government; Section II — demand deposits from central government and commercial banks with maturity up to one month; Section III — reserve requirements from commercial banks as other contingent liabilities; Section IV — currency composition of reserve assets (all reserve assets held in currencies of the basket of the Special Drawing Right as of end-2019).
    - RDT for central government: Section I.B — demand deposits with CBM; Section II — scheduled payments of principal and interest for Eurobonds and loans; Section II.3 — repayments for the gold swap recorded in line for repos; Section III.1 — guarantees provided to corporations; Section IV.(1)(d) — value of gold used for the gold swap recorded as “lent or repoed but not included in Section I”.
  - Neither CBM nor central government has financial derivative positions.
  - MOF agreed to start providing information (e.g., debt service schedules for bonds) to CBM monthly.
- Recommendations (with priorities and deadlines):
  - Receive necessary information from the MOF to start drafting RDT for the CBM and the central government (high priority by March 2020).
  - Submit draft RDTs to the IMF’s Statistics Department for review (top priority by June 2020).

### External Debt Statistics (EDS) — findings and recommendation
- Findings:
  - CBM identified loans (intercompany lending in direct investment and loans in other investment) where borrowers have not repaid principal nor interest for more than five years.
  - Mission advised intercompany lending in direct investment should be treated as permanent debt (remain in debt instruments in direct investment).
  - Loans in other investment: large portion incurred by a couple of large corporations under bankruptcy procedures; mission advised removing such loans from IIP and EDS when it becomes clear loans will no longer be repaid (e.g., when liquidation is completed). Removed amount should be recognized as other changes (other flows) and not recorded in balance of payments.
- Recommendation:
  - Remove from IIP and EDS the large loans for which principal and interest have not been repaid. The amount should be recognized as other changes (medium priority when it becomes clear that the loans will no longer be repaid).

### Current account — Goods and services; Travel; Economic Citizenship Program; FISIM
- Goods and Services — findings:
  - Main data source for merchandise trade is foreign trade statistics by MONSTAT; CBM verifies MONSTAT with ITRS.
  - Cost-insurance-freight to free-on-board adjustment: freight ratio estimated as 3.03 percent and no ratio for insurance, based on survey of largest importers.
  - CBM records merchanting in the goods account.
  - Transactions of one air carrier and one sea carrier captured by ITRS.
  - Construction services sourced from ITRS; CBM introduced a new survey to construction corporations in 2019 to cross-check ITRS.
  - Export and import of manufacturing and maintenance services are not significant.

- Travel — findings and recommendation:
  - Travel services recorded based on number of travelers and average spending.
  - Average daily spending per traveler estimated from websites and phone contacts for major hotels and restaurants; available by region and by season.
  - Average spending multiplied by number of overnight stays from MONSTAT.
  - Number of overnight stays at unregistered accommodations currently estimated as 30 percent of the stays at registered accommodations (survey results in 2005 indicated 30 percent of private accommodations were not registered).
  - ITRS used to record business, health, and education related travel; ITRS captures credit card expenses.
  - CBM plans to update average daily spending and the ratio for unregistered accommodations by March 2020; export of travel services expected to increase after updates.
  - More than 100 large and small new hotels (including luxury five-star hotels) have been built in recent years; many unregistered accommodations have been registered; some large hotels have casinos popular among non-resident tourists; mission provided guidance to record gambling receipts in services and current transfers.
- Recommendation:
  - Execute the planned updates to average daily spending of travelers and share of unregistered accommodations. Start recording travel services based on the updated information (high priority by March 2020).

- Economic Citizenship Program (ECP) — findings and recommendation:
  - Findings:
    - ECP introduced in 2019 allows foreign nationals to acquire Montenegrin citizenship in return for lump sum payments to the government or investment projects.
    - CBM and mission agreed to record the entire amount of processing fees paid by applicants to the ECP in government services for simplicity.
    - Subsequent payments under ECP should be recorded as:
      - Capital transfers: payments to governments to develop social infrastructure without receiving equities.
      - Current transfers: payments to governments for general spending without receiving equities.
      - Direct investment or portfolio investment (equity and investment fund shares): investment in development projects receiving equities (e.g., resort hotels).
    - CBM plans to start recording data based on information from the ITRS; mission advised CBM to approach the ECP agency to collect precise information and cross-check ITRS data.
  - Recommendation:
    - Start recording payments under the ECP in services, current/capital transfers, or direct/portfolio investment following the mission’s guidance (high priority by March 2020).

- Financial Intermediary Services Indirectly Measured (FISIM) — findings and recommendation:
  - Findings:
    - CBM prepared preliminary FISIM estimates. Reference rate calculated based on weighted average of paid and received interest for all deposit and loan assets and liabilities of Montenegrin banks.
    - Mission advised CBM to calculate average interest rates received from loan assets and paid for deposit liabilities of DTCs, respectively.
    - Export of FISIM should be calculated as differences between the reference rate and calculated interest rates for loan assets and deposit liabilities, separately.
    - Import of FISIM should be calculated similarly from differences between the reference rate and calculated interest rates for loan liabilities and deposit assets for other sectors.
    - Mission advised CBM to discuss methodology with MONSTAT to ensure consistency with national accounts.
  - Recommendation:
    - Start recording FISIM from data for the first quarter of 2019 according to the methodology agreed during the mission (medium priority by June 2020).

### Resources — findings and recommendations
- Findings:
  - CBM created a new division responsible for IIP.
  - Total number of staff at the Balance of Payments Division and IIP Division remains eight, including two staff specializing in handling the ITRS.
  - Plans to increase staff numbers for both divisions exist, but no budget allocated yet.
  - Compilation of ESS in Montenegro relies on CBM staff expertise, which requires continuous training and staff retention.
- Recommendations (with priorities and deadlines):
  - Allocate three additional staff to the Balance of Payments Division (high priority by December 2020).
  - Keep attending training courses for ESS (high priority on ongoing basis).

*IMF mission findings and recommendations as presented in the source document.*

### 2.   Data Source for Portfolio Investment Position by Sector ______________________________________ 11

### 2.   Data Source for Portfolio Investment Position by Sector

### Data sources for portfolio investment by sector
- Deposit-taking corporations (DTCs): portfolio investment data are obtained from the monetary and financial statistics (MFS) and are cross-checked with information from the International Transactions Reporting System (ITRS).
- Other financial corporations (OFCs): data collection started in 2019 on a pilot basis targeting leasing and micro-financing corporations. CBM plans to expand coverage to insurance corporations, investment funds, and pension funds by 2021.
- General government: portfolio investment data are obtained from the Ministry of Finance (MOF).
- Non-financial corporations and households: portfolio investment position data are estimated by accumulating transaction (flow) data from the ITRS; flow data are not adjusted for price and foreign exchange rate changes because the CBM assesses the investment as not significant.

### Government securities and custodial information
- The size of liabilities for the general government (Eurobonds issued by the government) recorded in Montenegro’s IIP was twice as large as the mirror data (debt security liabilities for all sectors) in the Coordinated Portfolio Investment Survey (CPIS).
- The mission suggested adjusting Eurobonds issuance data with ITRS information to reflect residents’ purchases of the Eurobonds.
- CBM does not have sufficient information to make the adjustment; CBM and MOF requested that the MOF obtain information on Montenegrin residents’ holdings of the Eurobonds from the custodian in London.
- Once custodian information is received, CBM and MOF should exclude that amount from the IIP and External Debt Statistics (EDS). If the MOF and CBM cannot revise the data, the inconsistency should be explained in the metadata.
- On a discounted government note issued in late 2019, the mission advised recording accrued interest for the note and financial service fees paid to the arrangers.

### Use of CPIS mirror data and quarterly compilation guidance
- The mission provided guidance on using the IMF’s CPIS portal to review liabilities in equity securities with mirror data reported by partner countries.
- The review found that mirror data in the CPIS for end-2018 were almost twice as large as the data recorded in Montenegro’s IIP.
- The mission recommended that the CBM use the mirror data from the CPIS to record liabilities in equity securities.
- To produce quarterly data with a lag of one quarter (given the CPIS is a semi-annual exercise with a lag of nine months), the CBM should adjust CPIS-based data using information from the ITRS.

### Recommendations (extracted from portfolio investment discussion)
- Switch to using MFS data for OFCs once data collection is fully implemented, instead of accumulating flow data from the ITRS (target expansion by 2021).
- Adjust Eurobond issuance data to account for residents’ holdings using custodian information; exclude resident-held amounts from IIP and EDS or explain in metadata if revisions are not possible.
- Use CPIS mirror data to record liabilities in equity securities and adjust CPIS-based figures with ITRS for quarterly compilation (to achieve quarterly data with a one-quarter lag).

*Source: IMF technical assistance report excerpt (Montenegro).*

### 18. In the medium term, position data for non-financial corporations and households

### 18. In the medium term, position data for non-financial corporations and households

### Portfolio investment positions — findings and recommendations
- Findings:
  - Position data for non-financial corporations and households should be collected directly rather than accumulating transaction data from the ITRS to avoid accumulation of errors from price and exchange rate changes.
  - Montenegrin enterprises are required to register the securities they issue at the Montenegrin depository of securities (potential source for portfolio investment liabilities).
  - Coverage of existing report forms (e.g., the direct investment survey or the loan asset and liability survey) could be expanded by adding questions on portfolio investment positions.

- Recommendations (with priorities and deadlines):
  - Compile quarterly portfolio investment position data and submit them to STA for review (top priority by December 2020).
  - Source the data for OFCs from the MFS and discontinue estimating the position data by accumulating flow data from the ITRS (medium priority by December 2021).
  - Record equity liabilities of non-financial corporations using the data from the CPIS with adjustments based on the information from the ITRS (high priority by June 2020).
  - Revise the data on Eurobonds issued by the government to reflect residents’ holdings. In case the data cannot be revised, explain it in the metadata (high priority by December 2020).
  - Investigate the information available at the Montenegrin depository of securities to use it as a source to record portfolio investment liabilities (medium priority by December 2021).
  - Explore expanding the coverage of the direct investment or the loan asset and liability survey to collect information on portfolio investment positions (medium priority by December 2021).

- Table 2. Data Source for Portfolio Investment Position by Sector (as presented)
  - General Government: Assets — Not Applicable; Liabilities — MOF
  - Deposit-taking Corporations: Assets — MFS; Liabilities — MFS
  - Other Financial Corporations: Assets — ITRS; Liabilities — ITRS
  - Non-Financial Corporations, Households, and Non-Profit Institutions Serving Households: Assets — ITRS; Liabilities — ITRS (CPIS with adjustments for equity liabilities by June 2020)

### Financial derivatives — findings and recommendations
- Findings:
  - CBM currently includes small positions of financial derivatives in other account receivable/payable.
  - Positions of financial derivatives can be separately available in the MFS for 2019 and forward.
  - Government is considering entering into financial derivative contracts to hedge exchange rate risk on US dollar loans financing a highway project (loans made by the Chinese government).

- Recommendation:
  - Start recording positions of financial derivatives in IIP. If the ITRS captures transaction data on financial derivatives, record them in balance of payments (medium priority by June 2020).

### Other investment — findings and recommendations
- Findings:
  - Deposits assets and liabilities for DTCs are sourced from the MFS.
  - Around 50 largest enterprises are requested to fill out report form Form RN-1 monthly to report transactions and positions at accounts held abroad.
  - CBM uses Locational Banking Statistics (LBS) compiled by BIS to capture deposits for enterprises and individuals not submitting Form RN-1; LBS provides position data and changes excluding exchange rate fluctuations.
  - CBM assesses that deposits with nonresident banks not covered by LBS or Form RN-1 (e.g., households’ deposits with Serbian banks) are not significant.
  - Data on loan assets and liabilities:
    - Form KO-1 (loan assets): submitted by around 60 enterprises; total amounted to around 30 million euro.
    - Form KZ-1 (loan liabilities): submitted by around 1,500 enterprises; total amounted to 2 billion euros.
  - Pilot survey to capture trade credit and advances launched in 2019: around 20 enterprises responded; selection based on customs and ITRS gaps.

- Recommendations (with priorities and deadlines):
  - Compile quarterly other investment position data and submit them to STA for review (top priority by December 2020).
  - Use the LBS data to supplement the data reported by Form RN-1 for other sectors’ deposit positions in IIP (medium priority by June 2020).
  - Start recording data on trade credit and advances based on the survey results (medium priority by December 2021).

- Table 3. Data Source for Main Items in Other Investment (comments summarized)
  - Euros circulating in Montenegro: MFS and information from neighboring countries; deposits in euros are divided by ratio of currency in circulation to deposits obtained from neighboring countries.
  - Deposits: MFS/LBS/Form RN-1; data from LBS should be used for positions as well as transactions to supplement Form RN-1.
  - Loans: MFS/Forms KO-1 and KZ-1; coverage of report forms could be expanded to include portfolio investment positions.
  - Trade credit/advances: General government — Report from the MOF; Other sectors — New survey; pilot survey results should be reviewed.

### Reserve assets — findings and recommendation
- Findings:
  - CBM and mission agreed that small holdings of Deutsche Mark and Austrian Schilling banknotes kept in CBM vault for many years should not be included in reserve assets.

- Recommendation:
  - Remove holdings of Deutsche Mark and Austrian Schilling banknotes from reserve assets. They should not be included in reporting to the IMF for the international liquidity and the survey for Currency Composition of Official Foreign Exchange Reserves (medium priority by March 2020).

### IIP currency composition — findings and recommendation
- Findings:
  - MFS provides currency composition information distinguishing euros and other foreign currencies for most banks’ external assets and liabilities.
  - Direct investment report forms and Forms KO-1 and KZ-1 include currency denomination.
  - Form RN-1 and the trade credit survey do not include currency information but include counterpart countries, enabling estimation of currency denomination.
  - Currency composition information on assets (other than reserve assets) and liabilities of the CBM and general government is available from CBM Accounting Office and MOF.
  - Items lacking currency composition can be recorded under “unallocated” in report form to STA.

- Recommendation:
  - Compile a preliminary version of the currency composition table required by Appendix 9 of BPM6 and submit them to STA (medium priority by December 2020).

### Consistency between IIP and balance of payments — findings and recommendation
- Findings:
  - Mission conducted a quality check of IIP data first disseminated in 2019; confirmed quality and re-disseminated them.
  - A file to check consistency between balance of payments and IIP indicated a few inconsistencies (e.g., loans made by other financial corporations’ assets).
  - CBM identified errors, contacted reporters to revise data, and received guidance on recording transactions and positions when guarantees are activated and government repays debt on behalf of defaulted enterprise.

- Recommendation:
  - Continue to check the consistency between balance of payments and IIP data (high priority on ongoing basis).

### Reserves Data Template (RDT) — findings and recommendations
- Findings:
  - RDT covers reserve assets, future pre-determined inflows/outflows (Section II), contingent assets/liabilities (Section III), and additional information related to reserve assets (Section IV); includes positions and transactions for both central bank and central government with resident entities.
  - Montenegro is fully euroized but not part of the Eurosystem; euros circulating in Montenegro are foreign currency assets; most reserve assets denominated in euros, complicating RDT scope.
  - Mission recommended recording foreign currency asset positions and scheduled payments that emanate from balance sheet and off-balance sheet positions of central bank and central government per paragraph 141 of RDT Guidelines; exclude expected payments/receipts not emanating from balance sheet/off-balance sheet positions (e.g., regular government spending, expected tax revenues).
  - Two templates recommended: one for CBM and one for central government.
    - RDT for central bank: Section I.A — reserve assets; Section I.B — holdings of Eurobonds issued by central government; Section II — demand deposits from central government and commercial banks with maturity up to one month; Section III — reserve requirements from commercial banks as other contingent liabilities; Section IV — currency composition of reserve assets (all reserve assets held in currencies of the basket of the Special Drawing Right as of end-2019).
    - RDT for central government: Section I.B — demand deposits with CBM; Section II — scheduled payments of principal and interest for Eurobonds and loans; Section II.3 — repayments for the gold swap recorded in line for repos; Section III.1 — guarantees provided to corporations; Section IV.(1)(d) — value of gold used for the gold swap recorded as “lent or repoed but not included in Section I”.
  - Neither CBM nor central government has financial derivative positions.
  - MOF agreed to start providing information (e.g., debt service schedules for bonds) to CBM monthly.

- Recommendations (with priorities and deadlines):
  - Receive necessary information from the MOF to start drafting RDT for the CBM and the central government (high priority by March 2020).
  - Submit draft RDTs to the IMF’s Statistics Department for review (top priority by June 2020).

### External Debt Statistics (EDS) — findings and recommendation
- Findings:
  - CBM identified loans (intercompany lending in direct investment and loans in other investment) where borrowers have not repaid principal nor interest for more than five years.
  - Mission advised intercompany lending in direct investment should be treated as permanent debt (remain in debt instruments in direct investment).
  - Loans in other investment: large portion incurred by a couple of large corporations under bankruptcy procedures; mission advised removing such loans from IIP and EDS when it becomes clear loans will no longer be repaid (e.g., when liquidation is completed). Removed amount should be recognized as other changes (other flows) and not recorded in balance of payments.

- Recommendation:
  - Remove from IIP and EDS the large loans for which principal and interest have not been repaid. The amount should be recognized as other changes (medium priority when it becomes clear that the loans will no longer be repaid).

### Current account — Goods and services; Travel; Economic Citizenship Program; FISIM
- Goods and Services — findings:
  - Main data source for merchandise trade is foreign trade statistics by MONSTAT; CBM verifies MONSTAT with ITRS.
  - Cost-insurance-freight to free-on-board adjustment: freight ratio estimated as 3.03 percent and no ratio for insurance, based on survey of largest importers.
  - CBM records merchanting in the goods account.
  - Transactions of one air carrier and one sea carrier captured by ITRS.
  - Construction services sourced from ITRS; CBM introduced a new survey to construction corporations in 2019 to cross-check ITRS.
  - Export and import of manufacturing and maintenance services are not significant.

- Travel — findings and recommendation:
  - Travel services recorded based on number of travelers and average spending.
  - Average daily spending per traveler estimated from websites and phone contacts for major hotels and restaurants; available by region and by season.
  - Average spending multiplied by number of overnight stays from MONSTAT.
  - Number of overnight stays at unregistered accommodations currently estimated as 30 percent of the stays at registered accommodations (survey results in 2005 indicated 30 percent of private accommodations were not registered).
  - ITRS used to record business, health, and education related travel; ITRS captures credit card expenses.
  - CBM plans to update average daily spending and the ratio for unregistered accommodations by March 2020; export of travel services expected to increase after updates.
  - More than 100 large and small new hotels (including luxury five-star hotels) have been built in recent years; many unregistered accommodations have been registered; some large hotels have casinos popular among non-resident tourists; mission provided guidance to record gambling receipts in services and current transfers.

  - Recommendation:
    - Execute the planned updates to average daily spending of travelers and share of unregistered accommodations. Start recording travel services based on the updated information (high priority by March 2020).

- Economic Citizenship Program (ECP) — findings and recommendation:
  - ECP introduced in 2019 allows foreign nationals to acquire Montenegrin citizenship in return for lump sum payments to the government or investment projects.
  - CBM and mission agreed to record the entire amount of processing fees paid by applicants to the ECP in government services for simplicity.
  - Subsequent payments under ECP should be recorded as:
    - Capital transfers: payments to governments to develop social infrastructure without receiving equities.
    - Current transfers: payments to governments for general spending without receiving equities.
    - Direct investment or portfolio investment (equity and investment fund shares): investment in development projects receiving equities (e.g., resort hotels).
  - CBM plans to start recording data based on information from the ITRS; mission advised CBM to approach the ECP agency to collect precise information and cross-check ITRS data.

  - Recommendation:
    - Start recording payments under the ECP in services, current/capital transfers, or direct/portfolio investment following the mission’s guidance (high priority by March 2020).

- Financial Intermediary Services Indirectly Measured (FISIM) — findings and recommendation:
  - CBM prepared preliminary FISIM estimates. Reference rate calculated based on weighted average of paid and received interest for all deposit and loan assets and liabilities of Montenegrin banks.
  - Mission advised CBM to calculate average interest rates received from loan assets and paid for deposit liabilities of DTCs, respectively.
  - Export of FISIM should be calculated as differences between the reference rate and calculated interest rates for loan assets and deposit liabilities, separately.
  - Import of FISIM should be calculated similarly from differences between the reference rate and calculated interest rates for loan liabilities and deposit assets for other sectors.
  - Mission advised CBM to discuss methodology with MONSTAT to ensure consistency with national accounts.

  - Recommendation:
    - Start recording FISIM from data for the first quarter of 2019 according to the methodology agreed during the mission (medium priority by June 2020).

### Resources — findings and recommendations
- Findings:
  - CBM created a new division responsible for IIP.
  - Total number of staff at the Balance of Payments Division and IIP Division remains eight, including two staff specializing in handling the ITRS.
  - Plans to increase staff numbers for both divisions exist, but no budget allocated yet.
  - Compilation of ESS in Montenegro relies on CBM staff expertise, which requires continuous training and staff retention.

- Recommendations (with priorities and deadlines):
  - Allocate three additional staff to the Balance of Payments Division (high priority by December 2020).
  - Keep attending training courses for ESS (high priority on ongoing basis).

*IMF mission findings and recommendations as presented in the source document.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1mneea2020001.pdf_