Montenegro’s finance minister has announced a deal with three western banks to help Podgorica hedge payments on a controversial $ 1 billion Chinese loan for a highway project that has put the small Balkan country in financial insecurity.
Finance Minister Milojko Spajic said on July 8 that the deal with two unnamed American and one French banks is not a “classic replacement” for a Chinese loan, but is actually cutting interest rates.
Montenegro’s previous government borrowed nearly $ 1 billion from China in 2014 to fund a 41-kilometer section of a 163-kilometer highway leading to neighboring Serbia.
The protracted project and the looming debt to the Export-Import Bank of China are at the core of the heated debate on the influence of China in Europe and the political choice of the NATO member country Montenegro.
Then-Prime Minister Milo Djukanovic is currently President of Montenegro, and the current government – with the thinnest majority since taking office in December – is made up of opposition parties that have largely opposed the highway project and have since sought a financial solution to the growing debt.
In April, Montenegrin officials sent a formal request to the European Commission for help in resolving China’s debt, and EU officials recently hinted that they were working behind the scenes to help.
Spayich declined to name the foreign banks involved, but said details would be known shortly.
The first section of the Bar-Bollare highway was originally scheduled to be completed in 2019, but due to construction delays and the COVID-19 pandemic, the deadline was pushed back to 30 November.
Tourism-dependent Montenegro’s economy contracted by about 15 percent last year due to the pandemic.
As a result of the highway deal, China owns about a quarter of Montenegro’s total debt, which reached 103 percent of GDP last year.
Beijing has agreed to postpone repayment of the first tranche of Montenegro’s loan, which was originally supposed to be repaid in July but was pushed back to the end of 2022.
Outgoing German Chancellor Angela Merkel this week called on the European Union and potential members in the Western Balkans to make progress towards accession as a strategic priority.
Albania, Montenegro, North Macedonia, Serbia, Kosovo and Bosnia and Herzegovina all want to join the EU.
With a message from Reuters