WASHINGTON, DC
– The Executive Board of the International
Monetary Fund (IMF) today approved SDR 60.5
million (about $US 83.7 million or Euro 74 million, 100 percent of quota)
in emergency assistance for Montenegro under the
Rapid Financing Instrument
(RFI) to meet urgent balance of payment needs stemming from the outbreak of
the COVID-19 pandemic.
The RFI provides rapid financial assistance to member countries facing an
urgent balance of payment needs, including those arising from commodity
price shocks, natural disasters, conflict and post-conflict situations,
without the need for a full-fledged economic program or reviews.
The COVID-19 pandemic has weakened Montenegro’s economic outlook. With
tourism accounting for around a fifth of the economy, Montenegro could
experience the largest contraction since independence. GDP is projected to
decline by nearly 9 percent in 2020 (11.7 percentage points below the
pre-virus baseline), but GDP is expected to grow by 5.2 percent in 2021 and
gradually converge to potential.
To mitigate the impact of the pandemic on the economy, the Montenegrin
authorities are implementing a package of fiscal and financial sector
measures to sustain economic activity during the crisis, including measures
to preserve employment, an extension of social benefits, and provision of
liquidity to the economy.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing
Director and Acting Chair, made the following statement:
“The global COVID-19 shock has hit
the Montenegrin economy hard and created urgent balance of payments and
fiscal financing needs. The authorities implemented swift and decisive
measures to contain and mitigate the spread of the pandemic, which enabled
a relatively speedy reopening of the economy. Nevertheless, given the
uncertainties surrounding the recovery of tourism globally, the economy
could take a few years to fully rebound to pre-pandemic GDP levels.
“Fiscal and financial sector policies have been accommodative in response
to the pandemic. A sizable temporary increase in the fiscal deficit to
accommodate higher public healthcare needs and targeted transfers to firms
and households affected by the pandemic is appropriate. Starting next year,
the authorities need to restore fiscal space and steadily lower public debt
by resuming their ambitious fiscal consolidation program started in 2017.
In this regard, avoiding large capital outlays — with particular restraint
in launching and implementing large projects which could jeopardize debt
sustainability — is crucial.
“Financial sector policy measures to ease the strain on borrowers would
need to be continually recalibrated as circumstances evolve. At the same
time, authorities should stand ready to take additional measures to
preserve financial sector stability, if necessary. When conditions permit,
the authorities should resume their planned asset quality review of the
banking system.
“The IMF emergency assistance under the Rapid Financing Instrument will
help provide the much-needed resources to address the urgent balance of
payments needs and support essential healthcare expenditures. The support
of other international financial institutions and development partners is
expected to close the remaining financing gaps, ease the adjustment burden,
and preserve the long-term economic growth of Montenegro.”
More information
IMF Lending Tracker (emergency financing request approved by the IMF
Executive Board)
https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker
Policy tracker: economic responses to COVID-19 by 193 countries
https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19
IMF Executive Board calendar
https://www.imf.org/external/NP/SEC/bc/eng/index.aspx
IMF COVID-19 Hub
Policy Tracker
Financial Assistance
Questions & Answers
