Institute for War and Peace Reporting | Giving Voice, Driving Change

Montenegro Engulfed by Economic Gloom

Deserted Podgorica shops testify to the republic's deepening financial crisis.
By Boris Darmanovic

Like so many in Montenegro, Garo, 50, is a new recruit to the black economy. Before he worked for Jugooceanija, a once mighty shipping company which recently declared bankruptcy, when debts incurred under UN sanctions claimed its last remaining ship.


These days he hawks cigarettes from a makeshift stand outside his apartment block. So long as the financial police don't swoop, he makes between 150 and 200 euro per month. His wife, Lela, earns roughly the same as a nurse in a Podgorica hospital. Their combined income is barely enough to buy basic foodstuffs for themselves and their two young sons.


Trades union figures compiled last March estimated the monthly cost of a basket of essential foodstuffs at 340 euro. Garo, Lela and their two children spend 50 euro a month on bread and milk alone. Electricity, water and telephone bills pile up unpaid as they wait for "better times", while new clothes or trips to the coast 50 km south of Podgorica are now the stuff of fantasy.


Garo and Lela's predicament is not unusual, indeed they are well off compared to many.


The Institute for Strategic Studies and Forecasts, ISSP, an economic research NGO, estimates that more than 60 per cent of the population survive on less than 180 euro per month and around 10 per cent receive less than 120 euro. Inflation is officially running at nine per cent, although the ISSP estimates it at around twice that figure.


Official statistics are hard to come by, however. When IWPR asked the state statistics bureau to estimate the average monthly wage for January, an official responded, "We don't calculate wages because the methodology is outdated."


Economic pundits claim that official reticence on the monthly income levels is no coincidence. Pensions in Montenegro are pegged to average salary figures provided by the bureau. While salaries are low, the estimates on which pensions are currently calculated are even lower. If accurate salary figures were released the state would be unable to cover the pensions bill.


At least Lela is still employed. Unemployment, according to the ISSP, is currently running at 20 per cent. Another wave of lay-offs is underway after western pressure forced the new government of Prime Minister Milo Djukanovic to institute radical reforms.


Chief among these has been an end to the practice of using government funds to bankroll ailing state-run companies. "The government can no longer manage companies and finance them from its own revenue. From now on, they will be controlled by the market," said Djukanovic, announcing the new measure at the beginning of this year.


Companies that were once prevented from going under by state handouts to cover salaries and expenses will now be left to go to the wall. "The situation can only get worse. Failing state-run companies will be closed. And there are plans for slimming down the civil service, which means that even more people will lose their jobs," said independent economic analyst Nebojsa Medojevic.


The crisis is even worse in northern Montenegro. There, according to the ISSP, unemployment is 25 per cent higher and wages 50 per cent lower than central and southern parts of the country. "I work at a private company. My monthly wage comes to 65 euro. Even though it is not enough for me to buy food, I still prefer to work than be unemployed like most of my relatives and friends," said Milos from the town of Mojkovac, one of the poorest in the north of the republic.


The IMF has made any further loans to Montenegro conditional on the government mapping out a poverty reduction strategy. That must include a realistic estimate of the extent of the problem, an analysis of its causes and suggested measures to tackle it. No such document has yet been produced. Official figures show that GDP rose less than expected in 2002, while industrial output has not increased for two years.


In Podgorica, the shops are deserted, despite constant sales and price slashing. "People are not buying clothes. There is less and less work. We are barely covering our overheads, while we hold out for better times," said boutique owner Sasa.


"Nobody's buying anything. I guess people are using their money to buy bread. Yesterday I sold two handbags for 10 euro each, which covered my costs, no more. I am 2,000 euro in debt, money I thought I would earn but now don't know how to repay," said Zeljko, a luggage shop owner.


For now, no one can tell when the people of Montenegro will have more money in their pockets, for unlike last year and the year before that, even officials have stopped promising better days ahead.


Boris Darmanovic is IWPR's Montenegro coordinator.