Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

More documents

Recommendations

Info

10 Chapter 1: The Economic and Institutional Context public administration reforms and public sector transparency, financial discipline and strengthening of the institutional processes for good budget and financial management (e.g., internal audit and control; public procurement), and strengthening of key oversight and accountability institutions (e.g., supreme audit institutions; ombudsman office). In each of these areas, the report analyzes the current challenges faced by Montenegro, and suggests policy, institutional, and capacity building measures that the government may want to consider for implementation. 1.30 The report is organized as follows: • Chapter 2 provides the general fiscal context for the rest of the report. It reviews the composition of public expenditure both in terms of economic spending and functional spending, and takes a closer look at two key drivers of fiscal pressure: the wage bill, and school reforms in education. • Chapter 3 discusses Montenegro’s public administration and institutional reform challenges, including: (i) the legal institutional framework for public administration reforms; (ii) progress with the implementation of the new salary policies, performance appraisal systems, and the new institutions recently created to promote transparency and accountability in the Civil Service (Administrative Court, and the Office of the Ombudsman); and (iii) new institutions or strengthened administrative capacity that may be needed for EU accession. • Chapter 4 reviews Montenegro’s public financial management and public procurement systems, including budget preparation and execution; financial control and internal audit; and the extent to which the public procurement commission and the supreme audit institution (SAI) are effective in promoting accountability, transparency and good governance. • Chapter 5 discusses infrastructure investment planning and institutional development challenges, largely from the perspective of the transport sector. A review of the transport sector is used to illustrate the challenges in capital budget planning and institutional coordination. • Chapter 6 discusses the nature and extent of fiscal risks posed by state-owned enterprises and local governments, and suggests steps that the Government can take to minimize such risks.
2. COMPOSITION OF PUBLIC EXPENDITURE AND KEY SOURCES OF FISCAL PRESSURE 2.1 The objective of this chapter is two-fold: first, it provides the general fiscal context for the rest of the report, including recent fiscal policy developments and an update of the discussion of the economic and functional composition of public expenditure in Montenegro. 15 Second, it takes a closer look at two of the key drivers of fiscal pressure in Montenegro—the wage bill and costs of public employment, and the fiscal pressures in education arising from teachers salaries and wages, and new reformed schools. Detailed analysis of the fiscal allocation and efficiency issues will be carried out in the second phase of the PEIR. 16 2.2 The chapter is organized as follows. Section A recent fiscal policy developments. Section B reviews the economic and functional composition of public expenditure across key spending categories. Section C discusses the composition of wage bill in depth, and suggests measures that can help contain this source of fiscal pressure. Section D examines the sources of fiscal pressure in the education sector, including teachers salaries and the newly reformed schools which require substantially greater input and for which the Government may need to find cost saving measures elsewhere to complete the reforming of schools. A. RECENT FISCAL DEVELOPMENTS 2.3 Fiscal policy has tightened in 2005, with the government deficit declining from about 3 percent of GDP in 2004 to about 2 percent in 2005. However, general government expenditure (comprising of central government and three extra-budgetary funds) remains high, in part because of the high wage bill and social welfare transfers to households. Chapter 2 contains further analysis of the composition of the wage bill in Montenegro. 2.4 Montenegro’s consolidated government expenditure, excluding local governments and transfers to the State Union of Serbia and Montenegro 17 , declined from about 38.6 percent of GDP in 2002 to about 37.9 percent in 2005, suggesting that the role of the Government in the economy declined only marginally (Table 2.1). Current expenditures, accounting for over 90 percent of total general government expenditure, declined from over 35.5 percent of GDP in 2002 to about 32 percent in 2005. 15 See “Republic of Montenegro Economic Memorandum”, World Bank, October 2005, for a recent discussion of the composition of public expenditures in Montenegro. 16 Given the range and complexity of the public expenditure and institutional issues to address in Montenegro in the coming years, the World Bank management approved a programmatic approach to PEIR, where the first phase covers institutional issues, but the subsequent phases will address expenditure composition and efficiency as well as debt and fiscal sustainability issues. 17 Montenegro’s transfer to SaM increased from nil in 2002 (when State Union was created) to 2.5 percent of GDP in 2005.
Page 1 and 2: Report No. 36533 Republic of Monten
Page 3 and 4: CONTENTS ACKNOWLEDGMENTS ..........
Page 5 and 6: TABLES Table 1.1. Montenegro’s Gr
Page 7: ACKNOWLEDGMENTS This is the first v
Page 10 and 11: ii Executive Summary and procuremen
Page 12 and 13: iv Executive Summary 2006-2010 is p
Page 14 and 15: vi Executive Summary bill in the ke
Page 16 and 17: viii Executive Summary 23. Going fo
Page 18 and 19: x Executive Summary 27. The impleme
Page 20 and 21: 2 Chapter 1: The Economic and Insti
Page 30 and 31: 12 Chapter 2: Composition of Public
Page 57 and 58: 3. PUBLIC ADMINISTRATION REFORM 3.1
Page 59 and 60: Chapter 3: Public Administration Re
Page 75 and 76: 4. PUBLIC FINANCIAL MANAGEMENT AND
Page 77 and 78: Chapter 4: Public Financial Managem
Page 79 and 80:
Chapter 4: Public Financial Managem
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87:
Page 90 and 91:
72 Chapter 5: Public Investment Pla
Page 92 and 93:
Page 94 and 95:
Page 96 and 97:
Page 99 and 100:
6. BEYOND THE NATIONAL BUDGET: FISC
Page 101 and 102:
Chapter 6: Beyond the National Budg
Page 103 and 104:
Page 105 and 106:
Table 6.2. Montenegro: Characterist
Page 107 and 108:
Page 109:
Page 112 and 113:
94 References Langseth, Peter Jerem
Page 114 and 115:
96 Annex 1 Indicator 2001 2002 2003
Page 116 and 117:
98 Annex 3 ANNEX 3. COSTS OF ALTERN
Page 118 and 119:
100 Annex 4 Local roads planning, f
Page 120 and 121:
102 Annex 4 with EU standards and d
Page 122 and 123:
104 Annex 4 Most of the railway’s
Page 124 and 125:
106 Annex 4 C. Public Expenditure o
Page 126:
108 Annex 4 Table A4.6. Transport i
show all

Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

Create successful ePaper yourself

Delete template?

Save as template?