M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 17– Economic and Monetary Policy Bilateral screening: Chapter 17 PRESENTATION OF MONTENEGRO Brussels, 25 February 2013

2 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Legislative coverage Budget Law – Regulates and defines the procedures for adopting the budget, evidence and budget management, budget preparation and planning, execution of the state budget and local governments’ budget, loans and guaranties, internal control, budget accounting, sate treasury, budget affairs, and internal audit. Law on financing local governments – Regulates and defines source and manner of financing for local governments.

3 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget Law General provisions Budget adoption, evidence and management Budget preparation, planning and execution Loans and guaranties

4 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy General provisions Regulates and defines the procedures for adopting budget, evidence and budget management, budget preparation and planning, execution of the state budget and local governments’ budget, loans and guaranties, internal control, budget accounting, state treasury, budget affairs, and internal audit. It defines the State Budget, Budget of the municipalities, and the Budget of state owned funds Defines and explains the role of all the involved parties in the preparation, and execution of the budget

5 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget Law General provisions Budget adoption, evidence and management Budget preparation, planning and execution Loans and guaranties

6 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget adoption, evidence and management One year budget Content of the budget defined: – Current budget – Capital budget – State owned funds budget – Financial Transactions (Financing) Consolidated treasury account where all the payments and receipts are recorded Central bank as the Government’s and municipalities' bank Budget accounting

7 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget Law General provisions Budget adoption, evidence and management Budget preparation, planning and execution Loans and guaranties

8 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget preparation, planning and Execution Bases for planning – Government’s Strategic priorities of economic policy – Report on Marco economic and Fiscal policy outcome for the previous year – Guidelines for Macro - economic and Fiscal policy for the current year – Specialized manual and Circular to Budget users, Local governments, and Capital budget Main economic parameter, Guidelines, manual, and deadlines for budget preparation and submission, Overall expenditure limits for spending units, and suggested limits for municipalities based on which they plan individually their budgets along with forecasts of spending for next three years. Budget calendar – April: Guidelines for Marco – economic and Fiscal policy – May: Specialized manual and Circular – July: Submission of budget requests to MoF by spending units – August: Submission of budget requests to MoF by State owned funds – October: Draft Annual Budget Law prepared by the MoF and sent to the Government’s General Secretariat – November: Local governments draft annual budget sent to the Ministry of finance – November: Budget Proposal to Parliament – December: Adoption of the annual Budget Law by the Parliament and annual Budget decision by the Local Parliament Reporting (expenditures, revenues, liabilities)

9 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budget Law General provisions Budget adoption, evidence and management Budget preparation, planning and execution Loans and guaranties

10 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Loans and guaranties Central government and debt management strategy Debt management strategy consisted of: – Three year debt framework – Guidelines for determining risk related to new loans – Guidelines regarding management of debt, cash, guaranties and loans – Required opinion of the Central bank Local government loans and guaranties only with the approval of the Central government

11 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Budgetary framework compared to Directive 2011/85/EU Definitions – Number of definitions in the Budget Framework Law are not defined exactly as prescribed by the Directive, but this fact is mostly contributed by the difference of the structure of the Budget Framework Law. – Deficit definition not in line with ESA standard – Several terms not defined at all, simply because there are not mentioned/used in the Law Accounting and statistics – Directive 2011/85/EU prescribes ESA 95 standards which are not fully implemented in the Montenegrin system Numerical fiscal rules not foreseen in the Montenegrin system Medium term budgetary framework – Medium term forecasts, not legally binding – Subject of revision, annually

12 Economic and Monetary Policy M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Economic and Monetary Policy Plans towards harmonization Changes in the legislation that would foresee the requirements prescribed by the Directive through: – Amendments to the budget framework law – Adopting bylaws Implementation of ESA 95 standards

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