Montenegro: IMF: Financial system is still in the stage adaptation

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The Executive Board of the International Monetary Fund IMF, in a new article about Montenegro, Article IV Consultation considered that the adaptation of the Montenegrin banking system at a late stage, after the large decrease after bursting credit bubble, but the banks are still struggling with a large proportion of non-performing loans NPL.

“Banks are aggressively sold out NPL to factoring companies that slow restructuring troubled assets, leaving private balance sheets weak. This has contributed to the negative feedback systems, where private sector sluggish demand contributes to the weakening of economic activity and the further deterioration in asset quality, “considered in the IMF.

As a result, new bank loans remains limited, despite the steady recovery of the deposit.

The IMF assessed that Montenegro has significant potential in energy and tourism, but it will require improving the business climate to increase the inflow of foreign investment in these sectors, including the strengthening of anti-corruption efforts.

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“Sustainable, long-term efforts in the field of fiscal consolidation are necessary to the public debt down to a comfortable level in the medium term. Recent fiscal measures the Government is welcomed as it will stop the pace of borrowing this year, but will have to be extended in the coming year and beyond, in order to suppress the public debt, “they said at the IMF.

“The limited progress in addressing NPL has left the private sector balance sheets burdened with high debt and the risk of its growth in the long run,” said the IMF.

It is important to remove structural distortions that blocs cleaning balance in  the private sector, including long-term and ad hoc judicial processes that delay the execution of collateral.

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