Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

Overview

  • Country Context

    Because of its size, the already high costs of developing and running national institutions are compounded by a limited capacity to exploit economies of scale in the provision of public goods and services. An EU-compatible legal framework and regulatory bodies, as well as the ability to absorb EU funds, all require substantial capacity building.Montenegro is a small, open economy aspiring to join the EU by 2025. It is also an economy vulnerable to external shocks, as it relies heavily on capital inflows from abroad to stimulate its growth.

    At the same time, the transition to a market economy requires a reduction in the state’s footprint in the economy. Creating a favorable environment for private sector development requires restructuring state-owned enterprises (SOEs) and rationalization of public spending to reduce the cost of the state.

    Montenegro started negotiations with the EU in June 2012 and strives to join by 2025, ahead of the other countries in the Western Balkans. Of the 35 negotiations chapters, two have been provision-ally closed and 22 have been opened. In the latest European Commission (EC) Progress Report on Montenegro, the importance of maintaining macroeconomic stability was stressed, noting that the rapidly rising public debt and high fiscal deficits, together with high external imbalances and high unemployment, are of particular concern.

    Moreover, the combined effects of large-scale public infrastructure investments and several new expensive social expenditure programs challenge fiscal sustainability. 

     

  • Strategy

    The new framework selectively supports Montenegro’s development agenda, with a particular focus on creating employment and economic opportunities and restoring fiscal balance in order to accelerate long-term inclusive growth. Montenegro faces the significant challenge of creating good jobs for its people; solving this problem requires action to strengthen the sup-ply of labor as well as to increase the demand for labor from potential employers.

    Young job seekers need to be equipped with relevant skills, while less-skilled and more vulnerable segments of the population need access to opportunities and jobs.The overarching objective of the World Bank Group’s (WBG) new Country Partnership Frame-work covering the period FY16–20 is to support Montenegro on the path of more sustainable and inclusive growth.

    Today, the growing fiscal deficits and public debt levels are making it more difficult to finance long-term private sector development at a pace needed for Montenegro to become a prosperous high-income country and move forward with EU accession. Restoring macroeconomic and fiscal sustainability and strengthening the financial sector will be critical to ensuring a stable macro environment that stimulates private investment and job creation in the long term. Implement-ing these measures will also be an opportunity to improve the quality of public spending for more inclusive social and employment services for poor and vulnerable populations so that all Montenegrin citizens benefit from future development. 

    Key Engagement

    Building on the successes of the original Montenegro Institutional Development and Agriculture Strengthening Project (MIDAS), in September 2016, the World Bank approved an additional financing loan in the amount of €3.0 million to further strengthen rural aeas and increase the country’s preparedness for EU accession requirements. This additional financing will allow for an expansion of the institutional capacity building achieved to date in order to manage public funds dedicated to agricultural support.

    The original MIDAS project has so far assisted in establishing Montenegro’s capacity to implement an Instrument for Pre-Accession Assistance in Rural Development (IPARD)-compatible system, a paying agency, a farm registry, and a pilot IPARD-like grant scheme supporting investments in agriculture holdings and the introduction of agri-environmental measures through five rounds of grants. Around 660 farmers, 60% of whom live in the poorer north, have received IPARD-like grants to enhance their agricultural production.

    The project also supported the strengthening of the country’s Food Safety System, including by developing the regulatory framework, building a Border Inspection Post, and upgrading national reference labs.

    MIDAS is also an example of excellent collaboration between the Ministry of Agriculture and Rural Development of Montenegro, the EU, and the World Bank.

  • Project Spotlight

    Through the Montenegro Energy Efficiency Project (MEEP), the World Bank has supported the Montenegrin Government’s efforts to improve energy-efficiency performance in public sector buildings, energy-efficiency implementation practices and capacity in public institu-tions, and energy-efficiency service providers in the country.   

    MEEP is investing in energy saving retrofits in about 27 schools and hospitals. It is insulating roofs and buildings and upgrading heating systems, substations, and networks. Facilities were selected for retrofits based on their energy savings potential, geographic distribution, number of users, and social and demographic impact.

    The project has helped with the retrofitting of 20 education and health sector buildings. Social surveys of users show very high end-user satisfaction with the results as well as increased awareness of the importance of energy efficiency.

    As a result, savings in heating energy have ranged between 30% and 67%, with an average of 46.7%.


LENDING

Montenegro: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments



STAY CONNECTED

In Depth

Additional Resources

Country Office Contacts

Podgorica, Montenegro
Bul. Džordža Vašingtona 98, 81000 Podgorica, Montenegro
Tel: +382 20 665 353
dvarezic@worldbank.org