22.07.2021 – 08:47
Montenegro has reached an agreement with four international banks to avoid the risk of a $ 1 billion debt to China. The news was announced by the MINA news agency, which referred to a statement by Finance Minister Milojko Spajic. The debt refinancing agreement also provides for the reduction of the repayment interest rate.
Economy Minister Jakov Milatovic told Reuters earlier this month that Montenegro was close to securing a debt swap or refinancing deal and hoped to lower the interest rate to below 1%.
Montenegro, with a population of 620,000, borrowed $ 944 million from China in 2014 to finance a 41km (25-mile) route of a highway which, once completed, should connect its main port of Bari. with neighboring Serbia, landlocked.
The new agreement was signed with Societe Generale of France, Deutsche Bank of Germany, Merrill Lynch International and Goldman Sachs International based in the US and has a 14-year term.
“We have saved the public debt of Montenegro from the danger that has been like a noose around the neck of the state,” said Spajic.
Montenegro will pay an interest rate of 0.88% in euros instead of the 2% it paid in US dollars. This will help the country reduce its public debt by about 103%.
The loan from the Export-Import Bank of China was taken in 2014 for a period of six years, with an additional maturity of 14 years. The principal has already begun to be settled.
Montenegro’s economy shrank by 15% in 2020, one of the largest contractions in Europe, as the COVID-19 pandemic damaged tourism, its main source of income for the country. The government in Podgorica forecasts economic growth of 2021 by 10.5%, followed by 6-7% in 2022.