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

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4. PUBLIC FINANCIAL MANAGEMENT AND PROCUREMENT................................57 A. INTRODUCTION.............................................................................................................. 57 B. BUDGET FORMULATION ................................................................................................ 58 Transparency and Comprehensiveness ........................................................................ 58 Budget Credibility........................................................................................................ 59 Program Budgeting ...................................................................................................... 60 Integrating Medium Term Planning into the Budget Process...................................... 62 C. CASH MANAGEMENT AND BUDGET EXECUTION ........................................................... 63 D. PUBLIC PROCUREMENT ................................................................................................. 65 Public Procurement Legislation ................................................................................... 65 Procurement Procedures and Practices ........................................................................ 66 Strengthening the Control Environment ...................................................................... 66 E. INTERNAL AND EXTERNAL AUDIT................................................................................. 67 Internal Audit ............................................................................................................... 67 External Audit .............................................................................................................. 68 F. CONCLUSIONS AND RECOMMENDATIONS...................................................................... 68 5. PUBLIC INVESTMENT PLANNING AND INSTITUTIONAL ISSUES: THE CASE OF TRANSPORT INFRASTRUCTURE...........................................................................71 A. INTRODUCTION.............................................................................................................. 71 B. PUBLIC SPENDING ON TRANSPORT INFRASTRUCTURE................................................... 71 C. IS THERE FISCAL SPACE FOR INFRASTRUCTURE FUNDING?........................................... 73 D. CHALLENGES WITH PUBLIC INVESTMENT PLANNING AND CAPITAL BUDGETING.......... 74 E. CONCLUSIONS AND RECOMMENDATIONS...................................................................... 77 6. BEYOND THE NATIONAL BUDGET: FISCAL RISKS OF LOCAL GOVERNMENTS AND STATE-OWNED ENTERPRISES ...........................................81 A. INTRODUCTION.............................................................................................................. 81 B. LOCAL GOVERNMENTS ................................................................................................. 81 State Government Oversight........................................................................................ 82 Assessment of Fiscal Risks .......................................................................................... 83 C. THE STATE-OWNED ENTERPRISE SECTOR..................................................................... 84 Government Oversight................................................................................................. 84 Assessment of Fiscal Risks .......................................................................................... 85 D. CONCLUSIONS AND RECOMMENDATIONS...................................................................... 88 REFERENCES.............................................................................................................................93 ANNEXES ....................................................................................................................................95 ANNEX 1. MONTENEGRO: KEY MACROECONOMIC INDICATORS............................................. 95 ANNEX 2. PROJECTIONS OF SCHOOL-AGE POPULATION, STUDENTS, AND TEACHERS............. 97 ANNEX 3. COSTS OF ALTERNATIVE SCHOOL REFORM SCENARIO, 2007-2012........................ 98 ANNEX 4. MONTENEGRO’S TRANSPORT INFRASTRUCTURE NETWORK, AND REGULATORY AND INSTITUTIONAL FRAMEWORK ................................................................................................. 99
TABLES Table 1.1. Montenegro’s Growth, Employment, and Unemployment (in ‘000), 2000-05..............4 Table 1.2. Inflation by Major Component, 2000-04 (percent) ........................................................4 Table 1.3. Total Public Debt of Montenegro, 2002-05 (% GDP)....................................................5 Table 2.1. Montenegro: Consolidated Government Fiscal Operations, 2001-05,% GDP............12 Table 2.2. General Government Spending, Economic Classification, 2004 (% GDP) .................14 Table 2.3. General Government Spending, Functional Classification, 2004 (% GDP).................15 Table 2.4. Education Spending: Overall and on Wages in Selected Countries .............................19 Table 2.5. Changes in Public Employment in Montenegro, 2002-05............................................20 Table 2.6. Student/Teacher Ratios, Montenegro and Selected Comparators, 2003 ......................25 Table 2.7. Average Teacher Salaries and Benefits, as a Ratio of PPPGDP per Capita, 2003.......26 Table 2.8. Reform Costs versus Related Budget Expenditures .....................................................27 Table 2.9. Cost of Reform Schools, Government’s Plans .............................................................29 Table 2.10. Number of Schools and Classes with 10 or less Pupils, 2004/2005 and 2005/2006 ..30 Table 2.11. Characteristics of the Highest Unit Cost Primary Schools.........................................31 Table 2.12. Outcomes for Students Leaving Secondary Education in 2004 by Type and by Length of Secondary Program .......................................................................................................32 Table 2.13. Savings from Adjusting School Reform Compared to Current Projections...............33 Table 2.14. Net Enrollment Rates in Selected Countries, 2004.....................................................35 Table 3.1. The Number of Solved Cases before the Administrative Court in 2005......................49 Table 3.2. Accountability Lines between Different State Administration Bodies ........................51 Table 6.1. Montenegro: Fiscal Operations of Local Governments, 2002-04 1/ ..............................83 Table 6.2. Montenegro: Characteristics of Major State-Owned Enterprises 1/ ...............................87 Table 6.3. Montenegro: Selected Financial Indicators for State-owned Enterprises, 2002-04 (millions €).....................................................................................................................................88 Table 6.4. Montenegro: Recommendations to Improve Government Monitoring of Local Government and SOE Activities....................................................................................................90 FIGURES Figure 1.1. Unofficial Payments and Corruption in SaM and in the Region...................................7 Figure 1.2: Unofficial Payments and Corruption in Montenegro....................................................8 Figure 2.1. Economic Composition of General Government Expenditure, 2005 (% share in total)16 Figure 2.2. Montenegro’s Functional Spending by Major Components (% share in total), 2005.17 Figure 2.3. Government Wage Bill as a Share of GDP .................................................................21 Figure 2.4. Comparison of General Government Wage Bill (% GDP) .........................................22 Figure 2.5. Size of General Government Wage Bill as a Share of Total Expenditures.................22 Figure 2.6. Public Employment as a Percent of Population ..........................................................23 Figure 2.7. Composition of Wage Bill by Function.......................................................................24 Figure 2.8. Major Contributors to the Wage Bill...........................................................................24 Figure 4.1. Montenegro Total Stock of Arrears, End-2005 (euros)...............................................64 Figure 5.1. Montenegro’s Capital Expenditure by Function, 2005 (% share in total capital expenditure) ...................................................................................................................................72 Figure 5.2. Percent share of Capital and Recurrent Expenditures in Transport Expenditure, 2003- 05....................................................................................................................................................72
Page 1 and 2: Report No. 36533 Republic of Monten
Page 3: CONTENTS ACKNOWLEDGMENTS ..........
Page 7: ACKNOWLEDGMENTS This is the first v
Page 10 and 11: ii Executive Summary and procuremen
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96 Annex 1 Indicator 2001 2002 2003
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98 Annex 3 ANNEX 3. COSTS OF ALTERN
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Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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