While the Montenegrin authorities expect to attract private investors to build the three remaining sections of the Bar-Boljara highway, rating agency Moody's believes that risks remain and that the government will eventually be exposed to some form of risk sharing to complete the project.
Moody's notes that highway costs are the main risk to the fiscal outlook.
"The completion of the priority share is expected in the second half of 2019. The total costs of that share are estimated at 929 million euros (based on the euro-dollar exchange rate as of September 19 of this year), which is equivalent to 20,7 percent of GDP. The risk includes a possible delay with cost overruns, as well as foreign exchange risks related to the loan in dollars taken from China's Exim Bank (whose rating is A1 stable) in 2014," Moody's report stated.
In a new report, Moody's confirmed the B1 rating for Montenegro, changing the outlook from "stable" to "positive". "The aforementioned change is a signal of investors' confidence in the economic progress of our country, as well as support for measures to stabilize public finances implemented by the Government of Montenegro and the Ministry of Finance," the Ministry of Finance announced.
Moody's report stated that the rating would deteriorate if the Government's borrowing indicators and potential liabilities worsened significantly. "Other negative factors include the weakening of Montenegro's external position, which probably reflects the failure of efforts to achieve competitiveness in the fields of tourism and other export-oriented industries," the rating agency states.
Rating agencies rate ratings by degree of credit quality, and Moody's B1 to B3 credit rating is just one notch above the worst rating.
Last week, the S&P agency also confirmed the outlook for Montenegro's rating, which was marked as "stable", while preserving the B+/B rating.
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