Montenegro is taking steps to retool its public finances after clawing its way back from the economic havoc caused by a Belt and Road loan from China worth almost a fifth of its economy.
Five years after the Balkan European Union candidate defied warnings from the international community and took a $944 million credit from China’s Exim Bank, Podgorica is looking to issue a Eurobond to help it slash public debt, as well as sell airport concessions and hand out passports to foreigners willing to invest in public projects.
The country of 620,000 is now looking past the debt it took on to build a highway linking its main port of Bar with northern neighbour Serbia.
It was just one of the infrastructure projects financed by the trillions of dollars deployed by Beijing, which has joined the struggle for influence between the EU, the U.S. and Russia in the volatile Balkans.
“In the second half of the year we may go for a Eurobond in the amount of 300 million euros ($338 million) to 500 million euros,” Finance Minister Darko Radunovic said in an interview.
Montenegro’s road to independence wasn’t as fraught as that of the other countries that emerged from the bloody breakup of Yugoslavia. It split from Serbia in 2006 and has been ruled by Milo Djukanovic, who has held either the Presidency or the Premiership almost continuously for the past 30 years. It’s now hoping to be the third of the seven entities that emerged from Yugoslavia to join EU.
But it’s still struggling to uproot corruption and the gray economy, which accounts for an estimated loss of 20% of output. Then there is the loan from China, which triggered a 2014 credit-rating downgrade by S&P Global markets and made it the only country in Europe to be identified as “at particular risk of debt distress” as a result of borrowing to finance a project for the Belt and Road Initiative by the Washington-based Center for Global Development last year.
Public debt jumped by almost a fifth before peaking at more than 70% of gross domestic product in 2018. Radunovic said the goal was to now cut that to 60% over the next three years.
To do that, the government is aiming to boost revenue by selling 30-year concessions at the country’s airports. It’s also granting citizenship to as many as 3,000 foreigners who are willing to invest at least 250,000 euros in government-approved projects.
Despite the burden of the Chinese loan, authorities have no regrets. The first 40-kilometre (25-mile) stretch of the highway should open in September of next year, nine months beyond schedule. The total 169 kilometre project may cost as much as $2 billion with help of private-public partnerships, according to Radunovic’s Ministry.
“It’s very difficult to preserve statehood if we don’t make Montenegro more accessible,” he said. “I see no dilemma. We have to build.”