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

Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure 27
leaving the sector would amount to only €890 rather than €2,890, though the salary savings
could accrue to the education budget (if that is agreed within the government) 32 ).
Cost of Reform Program
2.39 The other source of pressure on the education budget is from the government’s
education reform program. A ‘Strategic Plan for Education Reform for the Period 2005-09’
has been adopted by the Government. 33 The Plan estimates that it would cost €7.1m to
2.40 implement the reforms in 2006, with total costs over the Plan period of €24.6m. 34
However, this estimate does not include all the costs associated with the policies and programs
set out in the Plan. For example, a major element of the Plan is the ongoing reform in primary
and secondary schools, which includes school renovation and equipment, and a new curriculum
and associated textbooks, assessment arrangements and teacher training. The reform, which
started in 2004, is being phased in with the number of grades and schools included in the reform
increasing year by year. The first two sets of schools, which started the reform in 2004 and 2005,
have had many of the required inputs, allowing, for the first time, a more accurate calculation to
be made of the overall costs of the reform. Approximately €19.1m is included in the cost
projections of the Plan shared with the Bank team. However, a more detailed analysis reveals
that spending on the reform in schools for 2005-2010 is projected to be €24.7m (and a total of
€29.4m by 2012, when all reform schools are included) (Table 2.9). 35
2.41 While in the first two years the expenses related to the school reform account for a
little more than one-third of the allocated budget expenditures, in 2006 the projected costs
are slightly greater than the budget allocation (Table 2.8). It is important to note the pattern of
expenditure: spending
each year in 2006-2010 is
projected to rise to two or
three times the annual
spending to date. The
reform costs are likely to
remain this high in the
upcoming years because of
Table 2.8. Reform Costs versus Related Budget Expenditures
2004 2005 2006
Budget expenditures (capital,
maintenance and learning materials)
3,899,999 5,892,272 3,531,777
Reform cost 1,431,740 2,188,799 3,612,000
Reform cost as % of budget expenditures 37 37 102
Sources: Montenegrin Ministry of Finance; Bank staff estimates.
the large number of schools and classes that will start the reform process in 2007 and 2008.
Table 2.8 compares the cost of the reform schools with relevant budget expenditures (capital
32 Of course, more savings would accrue in future years; but here we are considering what the Government would
have to do in order to keep to the 2006 budgeted allocation for salary costs.
33 The Strategic Plan deals with three key issues: (i) the issues of more efficient management and coordination
among the institutions implementing the reform; (ii) the key principles underlying the success of the reform process;
and (iii) the reform priorities at different levels of education (pre-school, elementary, secondary, and adult
education)
34 The cost estimates in this section are based on Education Sector Strategic Plan which at the time of preparation of
this report was still being finalized. As a result, final cost estimates may change somewhat, but not significantly
enough to alter the basic conclusions of this analysis.
35 The Bank team is working with the Government to calculate more accurate figures for the remainder of the Plan.