Monday, May 11, 2009
Economic crisis plunges Montenegro into uncertainty
The wealthest municipality in Montenegro has had to halt reconstruction on one of its top resorts for lack of funds. Just weeks ahead of the main tourist season, the town of Petrovac does not resemble the pictures of bliss on postcards -- instead, it consists of a half-finished promenade, uncleared beaches and dusty roads.
It is uncertain how long the town will have to wait for prosperity to return. The Budva municipality cannot afford to pay construction firms to finish the work. The municipality, which once boasted over 100 millionaires among its population of 15,000 is now teeming with employees who have not received salaries in four months.
Budva's reputation rested on sales of seaside homes, apartments, hotels and land to foreigners. Now that the crisis has hit globally, the banks that made the loans are selling off the very same dwellings.
The municipality itself is 20m euros in debt -- mainly because of failed construction projects -- and faces a blocked bank account. Budva is not alone in its misery. Last week, projections of a 4% decline in Montenegro's GDP this year overshadowed the government's former projections of up to 2.5% growth.
"The primary revenues of the Montenegrin budget in the first quarter of this year were 216m euros -- about 13.8% less than expected," the finance ministry said. Finance Minister Igor Luksic is currently negotiating with Deutsche Bank to iron out the terms of a 75m-euro loan that will help boost the country's 1.6-billion-euro budget.
The government, which has already obtained a 150m-euro loan from the European Investment Bank to back the liquidity of financial institutions, is also holding talks with the IMF and other international creditors.
"The IMF is ready to support our financial system under certain conditions," Luksic said after returning from the Washington meetings of the IMF and World Bank last month.
The budget suffers from a lack of foreign investment, a source of revenue that dried up abruptly. In 2007, the country saw almost 60m euros of income from privatisation -- the figure dropped to 11.5m euros in 2008. Contracted investments brought in 20.5m euros in 2008 -- ten times less than in 2007, Montenegrin Vice-President Vujica Lazovic said earlier this week.
He offered two reasons for the collapse in revenues from investment. "One is the global market crisis, and second is that we do not have many companies that we can offer for sale, particularly attractive ones."
Posted by Conference Organizer at 10:57 AM