Membership of the Republic of Montenegro in International Financial Organizations

Published date: 08.03.2007 11:57 | Author: IZVJEŠTAJI MMF-a

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The renewed statehood and independence marked a new beginning for the Republic of Montenegro. This, at the same time, implies inherited obligations. By the Resolution on Proclaiming the Independence of the Republic of Montenegro (Official Gazette of the Republic of Montenegro No. 36/06) adopted on the session of the Assembly of the Republic of Montenegro as of June 3rd 2006, it was, apart from other things, determined that the Republic of Montenegro with its full, international legal status, would apply and take over international contracts and agreements which had been concluded and which were entered by the State Community Serbia and Montenegro and which concern Montenegro and are in accordance with the current legal system.

After renewing of statehood, membership in the international financial institutions appeared as one of the pending issues. Thus a need appeared for entering an agreement with Serbia. That agreement were supposed to be acceptable for the international financial institutions, first of all, for International Monetary Fund and for the World Bank.

For the purpose of implementation of the above mentioned, representatives of the Republic of Montenegro and the Republic of Serbia on July 10th 2006 signed the Agreement between the Republic of Serbia and the Republic of Montenegro on Regulating Membership in the International Financial Organizations and Delimitation of Financial Rights and Obligations (Official Gazette of the Republic of Montenegro No. 45/06) which prescribed that Republic of Serbia should continue membership of the state community in the international financial organizations. Republics defined the way of taking over of the allocated and non-allocated credit arrangements which were taken over on the basis of international contracts and agreements.

After signing of the above mentioned Agreement, Prime Minister of the Government of the Republic of Montenegro, submitted on July 12th 2006, request for enrolling of the Republic of Montenegro into the World Bank group e.g. into the International Bank for Reconstruction and Development, International Development Association, International Finance Corporation and Multilateral Agency for Guaranteeing of Investments was submitted by the Prime Minister of the Government of the Republic of Montenegro as of July 17th 2006.

Simultaneously, through a number of meetings and communications, the activities were initiated in relation to regulation of the membership in the European Bank for Reconstruction and Development EBRD. The whole procedure was ended in a very short term and the EBRD Board of Governors at its session from October 25th 2006 confirmed that the Republic of Montenegro fulfilled the requirements for the acceptance into the membership of the Bank. After that, General Secretary of the Bank issued a certificate that the Republic of Montenegro became the member of the European Bank for the Reconstruction and development, retroactively as of June 3rd 2006. By the Government Resolution, Minister of Finance was appointed to be the Governor of the Republic of Montenegro in the European Bank for Reconstruction and Development. According to the bank procedure it was decided that Montenegro should get 400 shares which required effecting payment amounting to 1.050.000. The funds were provided by the awarded Swiss constituence grant after, by the Government Decision, Montenegro became a member of this constituence.

Procedure of satisfying the requirements for the acceptance of Montenegro into the membership of IMF and World Bank group was much more complicated.

In the parliament procedure the Law on Membership of the Republic of Montenegro in the International Monetary Fund and other Financial Organizations (Official Gazette of the Republic of Montenegro No. 66/6) was adopted as of October 26th 2006. Adoption of this law represents a part of the procedure which must be fulfilled by each country in order to access International Monetary Fund and World Bank. In line with the above mentioned law, Montenegro accepted membership in the International Monetary Food (IMF), International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), International Association for Development (IDA) and Multilateral Association for Guaranteeing of Investments (MIGA). The Law stipulated that fiscal agent of the Republic of Montenegro in the World Bank should be Ministry of Finance and that the Republic should be represented in IFC, IDA, IBRD and MIGA by the Minister of Finance as Governor. Central Bank of Montenegro was appointed to be fiscal agent of the Republic in IMF and Chairman of the Central Bank Council was appointed to be the Governor who represents the Republic in IMF.

After adopting of the law and the performed IMF mission, IMF Council identified the quota which amounted to 27,5 special Drawing Rights - SPR as well as the obligation of Montenegro to pay 24% out of its inscribed capital in SDRs or in the currency used in Montenegro. Montenegro ought to pay these funds within six months as of the day when its membership in IMF become approved through the voting procedure.

After the Government of the Republic of Montenegro accepted the proposed quota, IMF Board of Governors adopted membership of Montenegro in that international financial institution by which the last formal step for the official acceptance of Montenegro was made.
It was announced that official acceptance of Montenegro into the membership and ceremony of signing the IMF Statute should be held on January 18th 2007 in Washington.

After becoming the IMF member Montenegro will meet necessary requirements for its membership in the World Bank group.

Montenegro was informed and it approved the proposed quotas for the membership in the World Bank affiliations (IFC, IDA, IBRD and MIGA). The agreed quotas for the World Bank affiliations are as follows:

Membership status in IBRD-u requires:
a) Mandatory inscription of capital on the basis of 438 shares amounting to 120.635 USD per share. It was stipulated that 6% of shares should be paid in the following way: 0,60% amounting to 317.029 USD and 5,40% (2.854.259 USD) in the currency used in Montenegro, in cash or by issuing securities and
b) Optional inscription of capital on the basis of 250 shares which doesnt require payment in the moment when the inscription of capital was effected.
Membership status in IDA requires:
a) Mandatory inscription of capital amounting to 566.985 USD which will be paid in the following way: 10% amounting to 56.689,50 USD and 90% (510.286,50USD) in the currency which is applied in Montenegro, in cash or by issuing securities.
b) Optional inscription of capital shall be paid in the equivalent amount of 150.729 USD in the currency which is applied in Montenegro.
Membership status in IFC requires payment of 1.035.000 USD in the moment of acceptance in IFC on behalf of the mandatory inscription of capital on the basis of 1,035 shares, each share amounting to 1,000 USD.
Membership status in MIGA requires payment of 660.020 USD in the moment of acceptance in IFC on the basis of 61 share. 20% of this amount should be paid in the following way: 10% ought to be paid in cash in the applicable currency and 10% with the promissory note (own draft) denominated in its own currency.
Ministry of Finance has been implementing its final activities aimed at obtaining membership of Montenegro in the World Bank group. They are related to the obligation of signing the agreement between the World Bank affiliation and Montenegro about taking over of the rights and obligations on the basis of the previous contracts and agreements which the Community of Serbia and Montenegro had concluded with the World Bank and which concern Montenegro.
After implementation of activities prescribed in the procedures of the above mentioned financial organizations it is expected that during January 2007 Montenegro should become the World Bank member and affiliation.

IMF membership is important for the state from the several aspects. State automatically gets higher credibility in international circles and on the basis of the IMF report, international investors get information whether the state is risky for the foreign investments and what kind of policy is lead by the state.

International Monetary Fund is an international organization consisting of 184 member states. It is in charge of the global financial supervision system through the interest rates and payment balance. It is also in charge of providing technical and financial assistance. The IMF evaluation of the quality of economic policy in the state shall be the signal to the foreign investors whether to invest in Montenegro or not.

Department for International Cooperation and
EU Integrations
Jadranka Radunović,
Coordinator of the Department