Montenegro has asked the EU to help repay a loan to Chinese bank Exim, contracted for the construction of the first priority section of the Bar-Boljare highway, Deputy Prime Minister Dritan Abazovic said on March 26. to deputies.
Podgorica has taken heavily for the first stretch of the highway from Smokovac to Matesevo, and Abazovic believes it should be paid back to reduce Chinese influence in the country.
In 2018, Montenegro was among the eight countries growing risk of over-indebtedness after taking out Chinese loans under the One Belt One Road (OBOR) initiative, according to a to study by Washington-based think tank, the Center for Global Development.
The huge cost of the highway – estimated to be the most expensive road per kilometer in Europe due to Montenegro’s mountainous terrain – compared to the country’s small economy previously sounded the alarm among international financial institutions and rating agencies.
The cost of construction of the section Smokovac to Matesevo of the highway will amount to 895 million euros, up 10% from initial estimates, then Transport Minister Osman Nurkovic said in July 2019. To pay for the construction, Montenegro signed a loan agreement with Exim Bank for approximately 809 million euros in 2014. The loan has a 20-year repayment period, a five-year grace period and a fixed interest of 2%. Podgorica started withdrawing funds in 2015.
The previous government tightened fiscal discipline in an attempt to prevent an increase in public debt, with Exim Bank as the main creditor. However, he relaxed the measures in early 2020, only to come under intense pressure with the onset of the coronavirus pandemic (COVID-19). Its economy is among the most affected in emerging Europe by the pandemic due to the collapse of its tourism sector, which typically contributes 25% of GDP.
“Asked by the vice-president of the European Parliament, I said they should help us if they want to reduce the impact, so that our budget is not so dependent on debt,” Abazovic said in response to a question from Branko Radulovic. of the Democratic Front, member of the ruling coalition.
“We have come to an unenviable position, because we are not in the EU, and we have to ask for financial support to be able to serve the budget,” the deputy prime minister added, the local news agency reported. Mina.
Abazovic also stressed that the construction of the highway does not end with the first section; two more sections must be completed for the project to be meaningful.
“With what money should we do this, when a third of our debt is a Chinese loan. You talk about the debt of the new government of 750 million euros, and 500 million euros are needed to repay the debt accumulated by the previous government, ”he said.
The loan was taken out by a previous government, led by current President Milo Djukanovic, who ruled the country for more than three decades as president or prime minister for most of that time.
Abazovic denied that the current government has a negative attitude towards China, saying China “gave us a chance” and that the previous government was responsible for obtaining the loan.
However, he added that the highway is not built according to plan, saying new agreements with the Chinese side and new funds are needed, Mina reported.
The government headed by Prime Minister Zdravko Krivokapic has decided to sue the Chinese CRBC, which is building the section, for devastating the UNESCO-listed Tara River. CRBC is accused of breaking the law, building a facility without environmental protection measures and not in accordance with the project adopted for construction, which caused significant environmental damage to a significant area.
“The same company in Croatia is building the continental bridge-Peljesac and meeting all deadlines in a positive sense, and in our country completion deadlines are exceeded 22 times … Who will be responsible for this? “asked Abazovic.