EXCLUSIVE Montenegro relies on EU aid and asset sale to ease Chinese debt burden – officials
Montenegro, a small state in the Balkans heavily indebted to China, is negotiating for hundreds of millions of euros in cheap credit from the European Union and preparing to sell public assets to ease its financial dependence on it. from Beijing, senior officials said.
Montenegro’s indebtedness to China is at the heart of a heated debate over Chinese influence in Europe and could complicate EU expansion in the Balkans, EU officials, who have told Reuters, have told Reuters. asked not to be identified. Montenegro is a candidate for EU membership, a process that requires compliance with fiscal standards.
Montenegro borrowed $ 944 million from China in 2014 to finance a 41 km (25 mile) stretch of highway, which enemies of then Prime Minister Milo Djukanovic dubbed the “Road to Nowhere “, saying it was a type of waste and mismanagement under his rule, an accusation he denied.
It was to be the first leg of a 163 km link with neighboring Serbia, touted as a way to facilitate Sino-European trade via the Balkans. The 41 km segment, which was originally scheduled to be completed in 2019, is now expected to be completed by November 30.
But critics including Montenegrin opposition leaders, local economists, anti-corruption activists as well as the World Bank and International Monetary Fund called the highway a useless white elephant when the loan was signed.
These opposition figures are now part of Prime Minister Zdravko Krivokapic’s government as he continues negotiations with EU lenders to improve his financial situation.
Total public debt is now equivalent to 103% of economic output. Cheap EU funds could give Montenegro more financial leeway to invest in projects that will boost the economy, hard hit by the COVID-19 pandemic, an EU official involved in the talks said.
GERMAN, FRENCH, ITALIAN CREDIT?
Brussels turned to the Reconstruction Credit Bank (KfW) and the French Development Agency (AFD) – two state-owned development banks – as well as the Italian state lender CDP to lead the financial assistance, the official said. of the EU.
“The plan is for us to get offers from all three and then mix them up,” the official said. “I hope that an offer could be ready in the coming weeks, before the summer.”
A source close to the EU’s approach to Italy’s CDP said the EU had asked it, among other things, to come up with solutions for Montenegro but concrete steps had yet to be taken. taken.
AFD did not respond to a request for comment. KfW declined to comment.
The European Commission and Montenegro initially debated refinancing China’s debt, but dropped the idea because it would have required Beijing’s approval and they didn’t think China would be ready, the official said. ‘EU.
A spokesman for the Chinese Foreign Ministry said that the highway is important for the socio-economic development of Montenegro and that Beijing places great importance on developing ties with the Adriatic coastal republic of 628,000 inhabitants.
State-owned Export Import Bank of China, which extended the loan for 20 years, did not respond to a request for comment.
The European Commission said it will continue to work with Montenegro to support its infrastructure projects and is open to supporting the remaining sections of the highway project.
“The Commission will continue to support Montenegro on the path to accession and, in this context, will work with the country to find financial solutions to its investment projects and also ensure the sustainability of its public debt”, said the Commission. spokesperson Anna Pisonero. She refused to elaborate.
Montenegro, famous for its spectacular mountain scenery and jagged coastline, is also keen to launch a long-awaited audit of state assets, from railways to prime seaside lands, with the aim of selling some for the help repay the public debt.
“We need to have a strategic overview of our public sector,” Finance Minister Milojko Spajic told Reuters.
The state’s main assets include the electricity company EPCG, two major airports, the main seaport of Bar, and assets coveted for tourism development including the Grande Plage, 12 km (seven miles) of sandy coast near the Albanian border, according to Montenegrin economist Zarija Pejovic. .
The state still has several former Yugoslav naval berths and facilities in the picturesque Bay of Kotor. In the past, the government sold naval land for tourism development.
Spajic has not given an estimate of the amount of money that can be raised through the sale of assets.
Privatization alone is unlikely to be enough on its own to significantly ease Montenegro’s debt burden, according to Dejan Milovac of Montenegro’s anti-transplant watchdog MANS.
Montenegro has already agreed with China to defer repayment of the first tranche of € 60 million of the loan, now due at the end of 2022. The postponement is in line with delays in road construction by Chinese developer CRBC, according to the government .
Spajic said Montenegro is also considering using a financial derivative to effectively swap the Chinese loan in euros for dollars and reduce the interest rate to 0.6% from 2%.
Finding a counterparty willing to enter into such a contract could be a daunting task, according to an official at an international commercial bank in Montenegro.
“This government can hedge, but why would someone give them an interest rate of 2% in USD to 0.6% in euros? he said.
($ 1 = 0.8220 euros)
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