Montenegro Says Deal Reached To Temper Blow Of Massive China Loan
Montenegro's finance minister has announced a deal with three Western banks to help Podgorica hedge payments on a controversial billion-dollar Chinese loan for a highway project that put the small Balkan country in perilous financial straits.
Finance Minister Milojko Spajic said on July 8 that the
deal, with two unnamed U.S. and one French bank, was "not a classic
replacement" of the Chinese loan but effectively reduced interest rates.
A previous Montenegrin government borrowed nearly $1 billion
from China in 2014 to fund a 41-kilometer portion of a 163-kilometer highway to
neighboring Serbia.
The long-delayed project and looming debt to the
Export-Import Bank of China are at the heart of a heated debate on Chinese
influence in Europe and NATO-member Montenegro's political choices.
Then-Prime Minister Milo Djukanovic is now Montenegro's
president and the current government -- with a razor-thin majority after taking
office in December -- is made up of opposition parties that mostly opposed the
highway project and have since searched for a financial solution to the
mounting debt.
In April, Montenegrin officials sent an official request to
the European Commission asking for assistance to settle the Chinese debt, and
EU officials hinted recently that they were working behind the scenes to help.
Spajic declined to identify the foreign banks involved but
said details would emerge soon.
The first section of the Bar-to-Boljare highway was
originally due for completion in 2019, but construction delays and the COVID-19
pandemic have pushed the deadline back to November 30.
Tourism-dependent Montenegro's economy shrank by about 15
percent last year under the pandemic.
As a result of the highway deal, China holds about
one-quarter of Montenegro's total debt, which reached 103 percent of GDP last
year.
Beijing agreed to defer repayment of Montenegro's first
tranche of the loan, which was originally due in July but has been pushed back
to late 2022.
Outgoing German Chancellor Angela Merkel this week urged the
European Union and potential members in the Western Balkans to make progress
toward accession a strategic priority.
Albania, Montenegro, North Macedonia, Serbia, Kosovo, and
Bosnia-Herzegovina all want to join the EU.
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