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

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Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure
expenses, maintenance costs, and expenses for textbooks development, learning materials and
teachers training) in the period 2004-2006. This increase comes primarily from the one time
reform introduction in gymnasia.
2.42 For 2006, there seems to be a stark choice between salary increases or more reform
schools in order to remain within the allocated budget. There are additional concerns for
future years, especially 2007 and 2008, where the reform costs are the highest; indeed they are
three times the level of current spending on reform schools and, therefore, three times the level
of resources of these kind of non-salary expenditures in the government’s education budget.
Given that in 2006 almost all the money in these budget lines is consumed by the reform schools,
there is no scope for using some of these resources to pay for the salary increase. The remaining
costs in the budget are to pay for utilities and other items which are very difficult to control at the
central level. 36 Each additional €1m in reform costs is equivalent to 173 staff salaries.
It seems unlikely that contributions from international agencies can be relied upon to make
up the shortfall in spending. Unfortunately, information on the level of contributions and on
the expected disbursements is difficult to obtain because of donors’ caution in making firm
commitments and because that spending does not appear in the Government Budget. In 2005,
there were total commitments of approximately €6.1m. 37 However, several of these activities
were finished by 2006, several were targeted to activities other than those for reform schools,
and, most importantly, at least €3.0m of this amount was targeted to the vocational education
(VET) system. In order to meet the projected shortfalls in 2007 and 2008, the Government
would have to raise each year the equivalent amount of money from international agencies and
apply this money to the reform schools. Fortunately, from 2007, Montenegro expects to have
access to IPA funding from the EU which, depending on the government’s priorities, could be
used to address education reform issues.
36 There is another potential problem: there are likely to be some maintenance and capital expenditures needed for
non-reform schools, but there do not appear to be the resources available to meet these needs.
37 The World Bank Credit which supports the Montenegro Education Reform Project is included in the Budget and
so is not counted in this figure.