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

Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure 15
Table 2.3. General Government Spending, Functional Classification, 2004 (% GDP)
General
Public
Defense and
Public Order
Education Health Social Protection Economic
Affairs
Services
Total Defense Total Pensions
Montenegro 8.9 6.0 2.0 5.7 6.2 14.6 … 2.3
Bosnia & Herzegovina 7.7 7.2 2.4 6.2 7.0 15.1 8.4 4.3
Croatia 2.5 4.9 2.3 4.3 6.6 15.1 … …
New Member Countries
Estonia … … 2.0 5.7 … 14.3 6.1 3.8
Lithuania 4.6 3.6 1.6 5.9 3.8 15.2 6.2 4.4
Slovenia 8.5 3.4 1.4 5.9 6.8 18.3 11.6 3.5
Slovakia 5.0 3.8 1.8 1.8 4.4 8.4 7.6 4.7
Poland 7.0 2.2 1.8 5.6 4.1 22.1 11.6 3.2
EU-8 Average 6.1 3.5 1.7 5.1 4.7 15.9 8.8 4.5
Others
Chile 0.3 2.7 … 3.8 3.0 7.5 2.9 2.7
Ireland 2.3 2.2 0.6 4.4 6.4 9.5 3.1 5.1
Sources: Montenegrin Ministry of Finance; IMF; World Bank: Bulgaria Public Finance Policy Review (November 2005)
and Bosnia and Herzegovina Public Expenditure and Institutional Review (April 2006).
Box 2.1. Fiscal Operations of the Extra-Budgetary Social Funds
The consolidated general government in Montenegro covers the Montenegrin Republican budget (central
government), and three extra budgetary funds--the Pensions Fund (PIO), the Health Insurance Fund (HIF), and the
Employment Fund. Total expenditures by the extra-budgetary social funds accounted for about 17 percent of GDP in
2005. Most of the pensions, health care, and unemployment services are delivered through these social funds.
Pension Fund (PIO). In 2005, the PIO spending amounted to about 10.5 percent of GDP. About 84 percent of this
(8.8 percent of GDP) was on pensions while health contributions accounted for another 11 percent (1.2 percent of
GDP). The remainder was spent on non-pension benefits and on administrative expenditures. On the revenue side,
contribution revenue amounted to 72 percent of total revenue (7.2 percent of GDP), and transfers from republican
treasury amounted to 27 percent of total (2.7 percent of GDP). The Fund’s operational deficit was about 1.5 percent
of GDP. The total stock of PIO arrears stood at 19.02 million euros at end-2005, of which the stock of pensions
benefit arrears amounted to 17.1 million euros.
Health Insurance Fund (HIF). In 2005, the HIF spending amounted to about 6.6 percent of GDP. About 49
percent of this (or 3 percent of GDP) was on health care. Gross salaries and contributions charged to the employer
amounted to another 44 percent of total spending (2.7 percent of GDP). The remainder was spent on non-health
benefits and on administrative expenditures. On the revenue side, contribution revenue amounted to 74 percent of
total revenue (4.6 percent of GDP), and transfers from the republican treasury and the PIO amounted to 26 percent
of total (1.6 percent of GDP). The Fund’s operational deficit was about 0.1 percent of GDP. The total stock of HIF
arrears stood at 14.5 million euros at end-2005, of which the stock of health benefit arrears amounted to 10.4 million
euros.
Employment Fund (EF). The Employment Fund of Montenegro is the main provider of employment services to
job seekers. In 2005, its expenditure amounted to about 1.2 percent of GDP. About 50 percent of this (0.6 percent of
GDP) was on benefits to unemployed individuals. The remainder was on administrative and operational expenses
(30 percent of total), and loans and credits to new unemployed persons (17 percent of total expenditure). On the
revenue side, about 50 percent of the total revenue came from contributions, and about 20 percent from republican
transfers. The rest (30 percent) came from duties and receipts from repayment of loans given to other institutions.
The Fund’s operational deficit was about 0.2 percent of GDP. The total stock of EF arrears stood at 4.4 million euros
at end-2005.