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

Montenegro Faces Cash Crisis

International financial assistance for Montenegro may soon dry up, with potentially disastrous consequences
By Boris Darmanovic

The October downfall of Slobodan Milosevic could spell economic misfortune for Montenegro.


While Milosevic ruled, Western powers looked benignly on Montenegro as a focus of opposition to the Serbian dictator. Financial aid rolled in to keep the shaky Montenegrin economy afloat.


But with the arrival of a new Serbian government under Vojislav Kostunica, Podgorica now seems less important to the international community. The Montenegrin leadership's push for independence - an idea frowned on by the West - has not helped matters.


The international community, along with Kostunica, wants Montenegro to stay in Yugoslavia, if only to preserve the framework of a state in which Kosovo can survive.


In defiance of these wishes, Montenegrin President Milo Djukanovic is lobbying for a referendum on independence. Should this lead to a cutback of funds, the republic's 650,000 citizens could face devastating hardship.


Some commentators caution against any rush towards secession. Daniel Serwer, an official at the American Institute for Peace, told Radio Montenegro, "Montenegro should consider whether it really wants to be independent if that means a slackening of foreign interest in the country. Montenegro exerted real influence only while Slobodan Milosevic was in power."


Some $100 million in Western assistance, most of it from the United States, has poured into Montenegro - half of this was in non-repayable aid.


Nebojsa Medojevic, a Montenegrin member of the G 17 group of independent economics experts, told IWPR that Montenegro will not be able to rely on this kind of funding for much longer.


"Non-repayable funds can be given only as humanitarian or technical aid, for places considered to be a potential crisis point," he said. "Since Montenegro is no longer in that category after Milosevic's fall, Western interest in giving money directly to the government budget is bound to fall. Montenegro will have to follow the regular practice of seeking loans."


Montenegro is beset with problems. Corruption is rife, privatisation has stalled after three years of fruitless discussion and the government loses huge chunks of revenue from the smuggling of goods ranging from cigarettes to stolen cars. According to unofficial data, the Montenegrin budget loses 50 million German marks a year just from cigarette smuggling.


These problems are not discussed openly. They are mentioned only in the private reports of foreign officials. Podgorica has so far faced no foreign pressure on this account. Indeed, Djukanovic's policy has been praised as pro-democratic and pro-reformist, a throwback to the days when he was regarded as a lever for overthrowing Milosevic's dictatorship.


According to Medojevic, the Western policy of turning a blind eye to economic problems and corruption, has weakened Montenegro's civil institutions which have been deprived of cash intended for them.


If foreign donations now dry up, the trade deficit that is being created by disproportionately high imports will certainly pose huge problems for the domestic economy. In retail stores, it is impossible to find locally produced items, apart from basic foodstuffs - bread and limited quantities of milk.


Medojevic says that most of the foreign aid was used to pay pensions and salaries to state officials and police, while profit-making enterprises received little.


During local elections, about 40 million German marks were invested in the renovation of Podgorica's streets and cosmetic changes to the capital. The construction of the new bridge over the Moraca river - for which money was secured from the European Union - is to begin soon.


People fear such foreign assistance will not continue but there is no official public discussion of the issue. Montenegro's own potential for earning is not bright. Tourism, which used to be the republic's chief source of income, has totally dried up since the break-up of Yugoslavia and the beginning of the war in Bosnia.


The case is the same with export companies. The Aluminium Enterprise, one of the largest, produces multi-million dollar losses annually, while the smelting works in Niksic continues to seek government aid for the payment of salaries.


One in six Montenegrins has a mobile telephone but one of the biggest mobile operators, ProMonte GSM, is foreign-owned so most of its profits go abroad.


The only salvation for Montenegro if foreign donations end would be entry into the International Monetary Fund, where it could apply for a loan. But entry depends on international recognition of Montenegro as an independent state and that is unlikely in the near future.


Politicians rarely broach economic issues in public. They shrink from discussing ways of bringing Montenegro's finances back to health while the political scene is in flux over independence.


The national media hardly ever deal with corruption and privatisation. State officials decline to answer questions about how foreign aid was spent. When asked how much money was received and where it was invested, the finance ministry says work is still going on to collect the data. Journalists conclude the government has no intention of publishing the figures.


There is no shortage of gloomy comment in the street, in shops and at work. Nikola, a third-year economics student, says, "Slobo has fallen and now America no longer needs us, which means no money."


Officials blame power cuts lasting three to four hours a day on a reduction in imports from neighbouring countries who are themselves suffering power shortages. The explanation has failed to convince people. Vlatko, a waiter in a Podgorica cafe, says, "The West does not want to pay for our electricity any longer, and why would it."


Boris Darmanovic is a Podgorica-based journalist