As part of the public debate on the draft Fiscal Strategy of Montenegro for the period 2024-2027, we submitted 10 proposals for amendments to this important document to the Ministry of Finance. This will be the third Fiscal Strategy since this instrument was introduced into the public finance system in 2014, and we have waited too long for the draft, whose content does not justify this delay. Our review of the draft Fiscal Strategy can be found here.
Proposal 1: Redefining the measure “Establishment of Financial Police”
The Fiscal Strategy is hardly the right place to promote a strategic novelty in the institutional framework for combating corruption and serious crime, especially when the rationale remains limited to a single paragraph, and the description of the problem to be solved is limited to the statement “considering the current decentralisation of institutions responsible for control in this area.” From such a vague explanation, it is unclear whose jurisdiction this new “body” would take over. It is important to note that there has been no public debate on this idea, nor has such a discussion ever taken place in parliamentary committees, government commissions, the National Anti-Corruption Council, or the National Security Council.
Regarding the idea of introducing a “tax police” into the legal system of Montenegro, it should be noted that this is not a new idea; in fact, similar proposals have appeared in official statements several times over the past five years, at least once in the context of comparisons with Italy’s “Guardia di Finanza.” A review of the development history of this institution in Italy can provide some insight into the scope and complexity of the transformation from “customs police” to “modern economic and financial police.”
Without intending to debate an idea that is neither well-explained nor justified, it is important to highlight the possibility that establishing a new special body with police powers regarding certain criminal offenses could lead to further fragmentation of the institutional framework. Additionally, there are currently no appropriate resources for staffing this body, either now or in the medium term.
It is true that the adopted Anti-Corruption Strategy includes an activity to “conduct an analysis of the need for the establishment of a financial police” between the fourth quarter of 2024 and the fourth quarter of 2025. Based on the draft Fiscal Strategy, it seems that the government is not waiting for the results of this analysis, assuming instead what its outcome and conclusions will be.
Regarding this issue, it is worth noting that since 2022, there has been an improvement in domestic and international trust in the work of the Special State Prosecutor’s Office (SSP) and the Special Police Department. In mid-2024, on the proposal of the current government, the Law on the Special State Prosecutor’s Office was amended to limit the SSP’s jurisdiction to the most serious forms of corruption and organised crime, considering the number of cases, the average duration of investigations, and the capacity of prosecutors. Given the current institutional framework and publicly available data on police staffing, there are significant structural challenges in police staffing. This was one of the reasons the current government proposed amendments to the Law on Internal Affairs, along with several other challenges outlined in the report on the state of the Ministry of the Interior as of October 31, 2023, which the government adopted on November 23, 2023.
Proposal 2: Supplement the measure “Budget Inspection”
The Budget Inspection has been given a special place in the Fiscal Strategy, but only regarding a new law that is being prepared. The inspection currently operates with only one inspector, although it is responsible for four systemic laws covering the entire public sector. Despite the activities of budget inspectors in 2024 that demonstrated the importance of this body, the number of authorised positions has not changed, nor have the conditions been created to improve the financial position of inspectors to attract candidates for these positions.
It is necessary to strengthen the staffing of the Budget Inspection by amending the Ministry of Finance’s organisational rules to double the number of planned positions (from the current three) and by making additional efforts to fill these positions by increasing financial compensation for the work.
Proposal 3: Introduce a new measure: “Strengthening the Position of the Protector of Property-Legal Interests of Montenegro”
The institution of the Protector of Property-Legal Interests of Montenegro faces numerous problems in its work and is not part of any strategic document in this area. Strengthening this institution will indirectly reduce spending in the area of legal disputes, although this is only part of the solution to this problem.
Some elements of this measure could include improving the transparency of the Protector’s work through regular reporting to the government and the public on cases, providing not only statistical data but also additional information on the highest-value disputes, the dynamics of their resolution, key challenges, and the Protector’s advisory and preventive functions. This could involve launching a dedicated website for the Protector, as well as implementing the State Audit Institution’s recommendation to introduce electronic records.
It is also necessary to improve the position and powers of the Protector through legal amendments that would clarify the conditions for appointment and dismissal of the Protector and their deputies, as well as conditions for renewing their mandate. The Protector should also be empowered to issue legal opinions independently and initiate procedures regarding the constitutionality and legality of contracts submitted under the Law on State Property. Additionally, it is essential to introduce penalties for state bodies (their responsible individuals) that fail to provide the Protector with the information necessary for representing the state in legal and non-legal disputes.
Proposal 4: Ensure supervision of the application of fiscal responsibility criteria
Amendments to the Budget and Fiscal Responsibility Law from 2023 transferred the responsibility for giving opinions on the determination of the application of fiscal responsibility criteria from the State Audit Institution to the Fiscal Council.
Since the Fiscal Council is not yet functional, nor is it realistically expected to be in the near future (the second attempt to appoint Council members is ongoing, with only two candidates meeting the criteria, while three members are to be elected), it is necessary to ensure that this assessment is carried out throughout the duration of the Fiscal Strategy, until the Council is appointed.
Therefore, it is essential to amend the Law and permanently regulate the responsibility for this task during the duration of this fiscal strategy. Even if the Council is completed by the end of this or next year, it cannot be expected to be operational to the extent required by the complexity of overseeing the application of fiscal responsibility criteria, for which the State Audit Institution itself needed time to prepare and create methodological acts.
Proposal 5: Introduce a new measure “Conducting spending reviews”
The constant growth of the current budget and “unproductive and discretionary” budget lines is a warning signal that the Fiscal Strategy must recognise. One way to address this problem is to introduce systematic spending reviews, focusing on legality but also on success and efficiency, due to the constant growth of the current budget and, in particular, discretionary spending items.
Given the situation of ambitious measures on the side of reducing or abolishing certain budget revenues, efforts must be made to identify savings and reallocate resources to new priorities. Spending reviews can focus on sectors (e.g., education) or specific budget lines, such as representation, vehicle procurement, items labeled “other,” etc.
Spending reviews need to be systematically integrated into the preparation of the state budget, and from them can arise the justification for amending regulations and systematising certain spending processes. Linking with the budget process would allow the recommendations from the spending reviews to be connected with fiscal management and budget planning processes, enabling verification of earmarked spending and opening space for achieving savings.
There is significant comparative experience in this area, as well as OECD guidelines, that can be used to define specific steps (developing a methodology, determining the responsibility for implementation by budget analysts within the Ministry of Finance with the possibility of forming inter-ministerial teams).
Proposal 6: Introduce a new measure “Optimisation of public administration”
The draft fiscal strategy does not address the problem of the growth of the public sector and the number of employees, which has been confirmed by official data in the Government’s public database (although it does not include forms of temporary employment, state-owned enterprises, nor is it based on reliable data from the CROO registry). The lack of work on better records, optimising the number of employees, and halting growth in all sectors poses a significant fiscal risk and must be included in the Fiscal Strategy.
A key measure in this chapter would have to be obligating the Government to reduce the number of employees across all levels of the public sector by a certain percentage, ensuring a reliable and precise database of public sector employees, monitoring changes in the number of employees in real time, and implementing systemic measures for better human resource management.
This measure, in addition to the already existing activities related to sectoral functional analyses, should include improving the system for monitoring employee performance and adopting a new Decision on mutual agreement termination of employment with severance pay, which will restart the process of reducing the public sector that was halted at the end of the previous Optimisation Plan.
Better and more accurate records of the actual number of employees through linking the CROO registry for monitoring the number of employees at the municipal level, institutions, and enterprises, as well as the state administration in terms of employees under work contracts and temporary and occasional employment contracts, is one of the measures that should be included. Strengthening human resource planning at the central level, with improved updating of the central personnel records and enhanced oversight from personnel records, are also some of the necessary measures.
Proposal 7: Introduce a new measure “Rationalisation of the use of service contracts”
It is necessary to implement a systematic measure to address deficiencies in how public bodies use service contracts and temporary work agreements, which have become an increasing burden on the state budget.
Budget requests from spending units do not include analyses and justifications of the needs and expected effects of engagements through fixed-term contracts. There is no methodology for calculating the provision of budget funds by the Ministry of Finance that would prescribe assessments of the long-term impact of new hires on the budget. When approving the annual budget, the Ministry of Finance does not have all the information necessary for deciding on the number and value of fixed-term contracts (service and temporary work contracts) that are to be signed. There are no systemic controls in the hiring process (both for fixed-term and indefinite employment) to prevent an employee who receives severance pay (based on a mutual agreement on termination) from finding employment in the public sector again before the expiration of five years or returning the received severance money.
Furthermore, there are no unified rules and procedures regarding the engagement (selection) of individuals through contracts, the amount of compensation, contract duration, reporting on the work performed, required professional qualifications, etc. Service contracts and temporary work agreements are even signed for positions that are systematised, contrary to the Law on Civil Servants and State Employees. There is no practice of preparing reports on the completion of tasks under service contracts or temporary work agreements. It is not possible to have a clear analysis of the total costs for engagements through service and temporary work contracts. Expenses under these contracts are recorded under various budget positions. There is also no comprehensive record (database) of service and temporary work agreements, nor is there adequate oversight and control of the implementation of these contracts by the contracting authorities or the agencies for which the contracts were made.
All of this leads to a constant increase in costs, with an unacceptably poor or non-existent record of the value received for the money spent and significant opportunities for abuse.
Proposal 8: Introduce measures to increase the efficiency of trials for criminal offences under the jurisdiction of the Special Prosecutor’s Office / Higher Prosecutor’s Office according to the amendments to the Special Prosecutor’s Office Law
Efficient trials, or trials within a reasonable timeframe, are a prerequisite for issuing final verdicts, which in turn are necessary for the permanent confiscation of property gained through criminal activities. To make trials more efficient, there is a need for more judges in the special department of the Higher Court, more courtrooms, better trial organisation, and improvements to procedural norms to prevent abuse and delays in proceedings. Over the past three years, there has been no progress in these areas. There are neither more judges nor more courtrooms, nor has there been an acceleration of judicial proceedings. It is necessary to prepare an action plan, under the jurisdiction of the Government or the Assembly, to increase the number of judges at the Higher Court in Podgorica, improve spatial capacities, and propose corresponding amendments to the Criminal Procedure Code.
Proposal 9: Introduce a new measure “Optimisation of the state’s vehicle fleet”
There is no unified policy for the procurement and use of official vehicles, and the prioritisation of procurement is poorly defined, leading to significant and inefficient budget allocations for this purpose. According to the Ministry of the Interior data from February 2024, 4,658 vehicles are registered as state property, which is 377 more than in 2022, or 85 more vehicles than in 2020. At the same time, poor practices from the past continue regarding the regulation of vehicle use: there is no unified oversight of vehicle use (GPS tracking), provisions defining engine capacity relative to the rank of the official using the vehicle are still in effect, the circle of individuals entitled to 24-hour use of official vehicles remains unchanged and too broad, allowing for loose interpretations by institutions, while oversight is non-existent.
It is necessary to improve the management of existing official vehicles owned by the state as part of general efforts to optimise spending, eliminate unproductive privileges for management in this area, and enhance oversight of both the vehicle procurement process and their use.
Proposal 10: Introduce a new measure “Strengthening budget transparency”
The draft strategy does not address the problem of a lack of budget transparency. Montenegro ranks 64th out of 125 countries on the budget transparency index in the official global ranking by the Open Budget Survey. In the region, only North Macedonia and Bosnia and Herzegovina have performed worse than us—other countries in this regard are ahead of us. Montenegro scored 48 out of a possible 100 points in the survey, indicating significant shortcomings in access to budget data.
Creating a citizen-friendly budget, preparing a semi-annual budget execution report to be submitted to the Assembly, providing non-financial data on the achievement of goals and indicators in the programme budget, and establishing mechanisms for public participation in budget preparation are just some of the recommendations that need to be fulfilled for Montenegro to improve its score.
